In 2006, a pair of Swedish entrepreneurs banded together to fight an ongoing problem: Piracy in the music industry was costing artists, retailers, and record companies billions of dollars in lost sales. Customers who had previously gone to CD or record stores to purchase music were now evading legislation to download songs for free, instantly into their music libraries from services such as Napster.
When Napster unexpectedly shut down in 2002, Kazaa, another controversial service, sprung up in its place. Swedish entrepreneur Daniel Ek saw an opportunity to combat illegal online activity through another means: delighting customers.
“I realized that you can never legislate away from piracy,” he said in a 2010 interview. “Laws can definitely help, but it doesn’t take away the problem. The only way to solve the problem was to create a service that was better than piracy and at the same time compensates the music industry. That gave us Spotify.”
He joined forces with fellow entrepreneur Martin Lorentzon to create what is now the most popular music streaming platform in the world. How did they do it? By delivering what the listener wants to hear, when and where they want it—and sometimes before they even realize exactly what it is they want.
The evolution of music through a proximity lens
An industry-wide trend is underway. Company strategies and customer desires are shortening the distance between when people decide they need something and how long it takes for them to get it. My friend and writing partner, Rob Wolcott, offers the following definition: “Technology is driving the production and provision of products and services ever closer to the moment of demand.”
Many of us have benefited from the somewhat creepy omniscience of Amazon’s anticipatory shipping—the retailer predicts products we might want and delivers them to a nearby warehouse before we’ve even placed an order. But the research Rob and I have done shows that this extends far beyond retail; proximity is the future across all industries, and it’s been in the works for years. In order to pinpoint where Spotify seized the opportunity to capitalize on proximity, let’s take a brief look at the history of music purchasing.
Record, CD, and tape players
Not too long ago, the primary means by which people bought music was by going into a store to choose a record, cassette tape, or compact disc. They would bring the item home or, by the mid 1960s, into their cars to listen. It was common to buy one or a few full albums at a time and to listen to them all the way through.
In the year 1979, Sony released the Walkman, a portable cassette player that gave millions of people the opportunity to listen to the music they wanted to hear, wherever they happened to be at the time. Instead of listening to tapes at home, they could bring them on-the-go.
At the time, nothing compared to its popularity, and the 1980s were riddled with copycats and imitators who never quite matched the success and convenience of the Walkman. While the $150 price tag and sleek design were quite attractive for such a device, the Walkman’s greatest feature was its ability to play the listener’s music of choice, so long as they owned the cassette.
By 2010, when the Walkman was officially retired, Sony had sold 200 million to customers across the globe.
The introduction of e-commerce introduced the option to purchase music online and have it delivered to your home. In 1994, the first legitimate recorded online transaction was a CD—Sting’s “Ten Summoner’s Tales”—purchased by a man named Dan Kohn and sent to his friend in Philadelphia. Shipments of CDs peaked at 942.5 million units in 2000 and fell by 25% to 705 million units in 2005. Downloading music (legally or illegally) was to blame for the disruption.
Napster and file-sharing
Twenty years after the Walkman was released, a new evolution of music entered the scene. In 1999, a company called Napster took the internet by storm. An online service giving students the ability to share MP3 files amongst one another sounded like science fiction, but it had arrived.
Instead of saving up money and leaving their homes to buy music, consumers could download files for free onto their computers. This raised obvious legal and ethical concerns, and due to a lack of moderation, Napster was involved in numerous legal battles regarding copyright and ownership of music. Nevertheless, music listeners had experienced the thrill of instant downloads without paying a high price tag.
iTunes and the iPhone
2001 saw the invention of the iPod—a listener could carry hundreds of songs in their pocket, downloaded from the iTunes store (or through an illegal file-sharing service) instantly.
“iTunes has turned the Walkman into a dinosaur, left the CD in the dust, and forced once-thriving record stores like Tower Records into extinction. It is a perfect example of what we in the industry call ‘disruptive innovation.’ That is, a technology that helps create an entirely new market and associated value network.”
— Rich Steeves, TechZone360
The best of both worlds—access to any music, and web-based interactivity and sharing—came together in 2006, when Ek and Lorentzon, the Swedish duo, designed their streaming platform to combat privacy and piracy issues that stemmed from unsavory file-sharing sites. Two years later in 2008, they launched Spotify, a free, albeit limited, music streaming service with integrated advertising, aimed to persuade customers to upgrade to a surprisingly affordable ad-free subscription.
Now, listeners could not only access limitless libraries of music they wanted from wherever they wanted, but they could do so in a way that was legal, affordable, and shareable.
Interestingly, as recently as 2017, radio was the most popular method for listening to music, but today online streaming services have taken over. Spotify leads the music streaming pack, though countless other services—Apple Music, Amazon Music, Tidal, YouTube Music—have entered the competitive scene.
Spotify makes good on its promise to help users “discover, manage, and share” music from a digital library of more than 70 million tracks, including over 2.6 million podcasts. In addition to streaming popular tracks, Spotify gives users a unique level of interactivity through its Singles and Sessions tracks, which are original, live Spotify recordings of popular artists singing some of their best hits.
Additionally, Spotify’s platform allows individuals to share their own original tracks with friends, family, and strangers, with very little effort involved.
Applying proximity to your business model
Today, music consumption has moved from walking or driving to a physical store to simply tapping your phone screen. It begs the question, with the advent of digitization and 3D printing, what other products and industries will follow the path of the music industry? And will your company be ready?
To predict and prevent disruption, complete the following exercise:
- Map out the points in your customer’s journey. Where are the potential pain points, or the points where the consumer exerts extra effort? Think driving to a record store, or bringing a CD home to listen in a single-purpose CD player.
- Choose one leverage point. In an ideal scenario, how could you remove this pain point for your customer? What might you change to bring the delivery of your product/service closer to the point when and where your customer needs it? Think like Napster, bringing file downloads immediately into the consumer’s home.
- Predict your customer desires. How are you utilizing data analytics to learn more about your customers and to predict what they might need in the future? Consider touchpoints and interactions where you might learn more about customer preferences. Think like Spotify, recording the songs listeners prefer and making customer recommendations.
Spotify’s success shows us that the future will be shaped by those who embrace proximity. The evolution of this trend is ongoing, yet it’s bringing us all closer to a shared purpose: to enhance the customer experience, by bringing the production and provision of value closer to the point of demand.