Spotify as a Coordinated Market Economy


Spotify first launched in 2008 in Stockholm, Sweden. Spotify is a music-streaming subscription service, in which users pay a premium every month and have full access to a large database of music, podcasts and radio stations. In the way that Spotify rose to success, it is quite easy to see that the Swedish tech company behaves in the same way as its country’s economy. Sweden follows a Coordinated Market Economy (CME). Elements of a CME include strategic interaction, institutional support, access to capital is based on reputation, a sensitivity to long-term profitability, imperfect market conditions and strong industry relations (Hall and Soskice, 2004). In the same way, Spotify’s rise to success largely depended on the company slowly building its industry relations, reputation and forming a loyal consumer base. The creation of Spotify was also based on the premise of strategic interaction – adhering to the gap in the industry for a subscription-based music streaming service. By 2009, Spotify was receiving government funding as well. Due to its large success in the U.K, the Spotify received backing and government funding from the British government. Spotify is also involved in an imperfect market and is sensitive to long-term profitability. “Despite rapid growth in users and revenue, Spotify isn't making a profit, primarily because of large licensing payments to record labels” (Nicholson, 2017, p. 1). Additionally, just like how CMEs is often contrasted with Liberal Market Economy (LME), Spotify has its own opposition, Apple Music, which also behaves like an LME.

Sources:

Hall, P. A., & Soskice, D. (Eds.). (2001). Varieties of capitalism: The institutional foundations of  comparative advantage. OUP Oxford.

Nicholson, Johanna. (2017, September 6). If Spotify is so huge, why is it losing money? ABC News. Retrieved from https://www.abc.net.au/

Pärson, Pär-Jörgen. (2018, March 15). Spotify: The impossible success story. Northzone.      Retrieved from https://northzone.com/

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