Skip to main content

Previous

India 2050: the world’s biggest economy?

Next

Asda and Sainsbury’s: another doomed takeover?

case study

Spotify

Spotify has turned around the declining music sales market almost singlehandedly, but Phil Waterhouse argues that it is doomed to failure unless it can improve its profitability

The dot-com crash of 2000–01 was infamous for companies being overvalued and over-hyped. In the early days of the internet, nobody had quite worked out how to successfully monetise websites and the services they provided. Websites such as Lastminute.com were the darlings of the media, offering customers the opportunity to book vastly discounted rooms in hotels with spare capacity. At its peak, the company was valued at over £750 million. While the business still exists and is proving to be a profitable e-commerce venture, the lack of barriers to entry, and the presence other sites such as Laterooms.com offering a similar service, mean the valuation of the firm has decreased significantly.

The growth of digital music has revolutionised the industry and caused the near demise of high street retailers such as HMV. However, the sector’s biggest success story, Spotify, is potentially facing the same issues as other online-only businesses. Fundamentally, the business is just not making enough money to justify its current valuation. The same criticism was levelled at Amazon for many years, yet now Amazon is ranked only behind Google, Microsoft and Apple as the largest company in the world in terms of market capitalisation.

Your organisation does not have access to this article.

Sign up today to give your students the edge they need to achieve their best grades with subject expertise

Subscribe

Previous

India 2050: the world’s biggest economy?

Next

Asda and Sainsbury’s: another doomed takeover?

Related articles: