Long Tail or Bottleneck: What’s Next for Spotify?

This paper discusses the evolution of the music industry in the digital era, the emergence of interactive streaming, and the strategy behind the Spotify music service which now controls the largest share of the market for the distribution of musical recordings. With the emergence of digital technologies, new download and streaming channels have displaced the traditional record store and reduced the importance of radio promotion. Independent artists and labels are now more able to promote new acts, reach new fans, and learn about listener tastes. Nonetheless, the evolving market process will now determine whether or not content markets continue to loosen, or whether bottlenecks reemerge that allow major labels to maintain more control over market shares.

By Michael A. Einhorn, Ph.D.¹

I. INTRODUCTION

The recording industry can be understood as a self-contained ecosystem that evolves continually without arriving at a determinable equilibrium. Competitors in the music industry learn and respond through interrelated strategies related to technological advances, organizational design, and the evolution of methods for production, procurement, and distribution. At this time, the ascendant market winner in the evolution has been the transformative Spotify music service, which made interactive streaming the most popular delivery services and now controls the largest share of the market for musical recordings. This paper will review organizational issues and strategies at