{"id":28749,"date":"2018-11-12T15:06:52","date_gmt":"2018-11-12T20:06:52","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/how-spotify-beat-apple-amazon-and-google-using-machine-learning\/"},"modified":"2018-11-13T17:21:16","modified_gmt":"2018-11-13T22:21:16","slug":"how-spotify-beat-apple-amazon-and-google-using-machine-learning","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/how-spotify-beat-apple-amazon-and-google-using-machine-learning\/","title":{"rendered":"How Spotify Beat Apple, Amazon, and Google Using Machine Learning"},"content":{"rendered":"

\"\"<\/a>In an era in which Apple, Amazon, and Google are dominating the technology world, Spotify has succeeded in besting all of them in the music streaming industry. Spotify also helped reverse the decade-long secular decline in the global recorded music industry, which declined from $25.2 billion in 1999 to $14.2 billion in 2014[1]<\/a>. Since 2014, that decline has reversed following the explosive growth of the music streaming industry which grew to $6.6 billion in 2017 to represent 38% of the global recorded music industry[2]<\/a>.<\/p>\n

Figure 1 \u2013 Global Recorded Music Industry Revenues [Source: IFPI]<\/strong><\/p>\n

\"\"<\/a><\/p>\n

The rapid growth in the music streaming industry was driven by Spotify, a global leader with ~42% market share and \u20ac4.1 billion revenue in 2017[3]<\/a>. This was a major feat by Spotify, whose major competitors include technology titans like Apple, Amazon, and Google. Apple Music, Spotify\u2019s nearest competitor, only has approximately half the global subscriber base and market share as those of Spotify[4]<\/a>. The question is then, how is Spotify able to fend off its major competitors, who are much more established in the technology industry?<\/p>\n

One key offering by Spotify is to provide users with machine-generated playlists like Discover Weekly, a personalized playlist with weekly updates. This allows Spotify to differentiate itself, as users who are attracted to these auto-generated playlists choose Spotify over Apple, Amazon, and Google. Machine-generated playlists now represent 31% of all listening activities on Spotify, compared to less than 20% just two years ago, attesting to increasing popularity of such playlists to users[5]<\/a>.<\/p>\n

Figure 2 \u2013 Spotify\u2019s \u201cMade For You\u201d Playlists and Discover Weekly Playlist [Source: Author]<\/strong><\/p>\n

\"\"<\/a>\u00a0 \u00a0 \u00a0\"\"<\/a><\/p>\n

Spotify primarily uses three machine learning techniques to create tailored playlists[6]<\/a>:<\/p>\n

    \n
  1. Collaborative Filtering<\/u><\/strong>: Using user\u2019s streaming history, Spotify recommends songs that different users with a similar streaming history have listened to<\/li>\n
  2. Natural Language Processing<\/u><\/strong>: Spotify also navigates the Internet and scans for any text data to gather more information about songs<\/li>\n
  3. Raw Audio Models<\/u><\/strong>: Finally, Spotify analyzes the actual audio of songs to identify similar tracks in terms of their sounds. This is especially helpful in analyzing new songs that may not have enough streaming data<\/li>\n<\/ol>\n

    Playlists generated by machine learning have become the core of Spotify. Christine Hung, Head of Data Solutions at Spotify, has noted that Spotify has become more than a music streaming service to \u201ca very important platform for [users] to discover something new.[7]<\/a>\u201d<\/p>\n

    Arguably, Apple, Amazon, and Google have better machine learning technologies than Spotify, but Spotify\u2019s first-mover advantage and its vast data of streaming history have helped the company remain competitive. To maintain its edge, Spotify should continue to develop its in-house machine learning capabilities and obtain new technologies through acquisitions. \u201cSpotify Machine Learning Day\u201d in July 2018 with experts in machine learning as well as Spotify\u2019s acquisition of a music AI startup Niland in May 2017 are good examples of how Spotify stays ahead of the learning curve. Spotify could even consider partnering with one of the three competitors. The partnership could combine Spotify\u2019s best-in-class machine learning technologies with the competitor\u2019s wide digital distribution network to form a music streaming powerhouse.<\/p>\n

    One additional way for Spotify to quickly improve its recommendation capabilities is to ask users directly for their preference in music. Currently, Spotify\u2019s recommendation is based on users\u2019 implicit feedback such as stream counts. Users\u2019 explicit feedback, however, can serve as a more accurate indicator of what users want and can significantly improve Spotify\u2019s machine-generated recommendations.<\/p>\n

    Even though machine learning has been a competitive moat for Spotify, the competitors are catching up fast. How can Spotify better leverage its machine learning technologies to keep the lead in this industry? Spotify has already ventured out to AI-generated music with hiring of Fran\u00e7ois Pachet in 2017, \u201cthe world\u2019s foremost scientist in the field of AI-assisted music creation,\u201d but are there any other ways Spotify can use machine learning to offer new services[8]<\/a>? Also, in what potential areas can machine learning be used for Spotify to engage with the artists directly who would like to place their songs on Spotify?<\/p>\n

    (Word Count: 797 Words)<\/p>\n

    \n

    [1]<\/a> International Federation of the Phonographic Industry, \u201cGlobal Music Report 2018: State of the Industry\u201d, https:\/\/www.ifpi.org\/downloads\/GMR2018.pdf<\/a>, accessed November 2018.<\/p>\n

    [2]<\/a> International Federation of the Phonographic Industry, \u201cGlobal Music Report 2018: State of the Industry\u201d, https:\/\/www.ifpi.org\/downloads\/GMR2018.pdf<\/a>, accessed November 2018.<\/p>\n

    [3]<\/a> Spotify Technology S. A, March 2018 IPO Prospectus, http:\/\/d18rn0p25nwr6d.cloudfront.net\/CIK-0001639920\/f9537bde-f9af-4553-b0bd-e7421f1f5074.pdf<\/a>, accessed November 2018.<\/p>\n

    [4]<\/a> Morgan Stanley, \u201cSpotify Technology: House Band at a Big Party \u2013 Reiterate OW,\u201d May 18, 2018, via Thomson Reuters\/Investext, accessed November 2018.<\/p>\n

    [5]<\/a> Spotify Technology S. A, March 2018 IPO Prospectus, http:\/\/d18rn0p25nwr6d.cloudfront.net\/CIK-0001639920\/f9537bde-f9af-4553-b0bd-e7421f1f5074.pdf<\/a>, accessed November 2018.<\/p>\n

    [6]<\/a> Sophia Ciocca, \u201cHow Does Spotify Know You So Well?,\u201d Medium, October 10, 2017, https:\/\/medium.com\/s\/story\/spotifys-discover-weekly-how-machine-learning-finds-your-new-music-19a41ab76efe<\/a>, accessed November 2018.<\/p>\n

    [7]<\/a> O\u2019Reilly Media, \u201cMachine Learning at Spotify: You are What You Stream,\u201d December 7, 2017, https:\/\/www.oreilly.com\/ideas\/machine-learning-at-spotify-you-are-what-you-stream<\/a>, accessed November 2018.<\/p>\n

    [8]<\/a> Music Business Worldwide, \u201cSPOTIFY\u2019S SCIENTIST: ARTIFICIAL INTELLIGENCE SHOULD BE EMBRACED, NOT FEARED, BY THE MUSIC BUSINESS,\u201d January 22, 2018, https:\/\/www.musicbusinessworldwide.com\/spotifys-scientist-artificial-intelligence-should-be-embraced-not-feared-by-the-music-business\/<\/a>, accessed November 2018.<\/p>\n","protected":false},"excerpt":{"rendered":"

    In an era in which Apple, Amazon, and Google are dominating the technology world, Spotify has succeeded in besting all of them in the music streaming industry. The question is then, how is Spotify able to fend off its major competitors, who are much more established in the technology industry?<\/p>\n","protected":false},"author":11931,"featured_media":33869,"comment_status":"open","ping_status":"closed","template":"","categories":[52,1067,1909,765,346,249,4349,2738,2484],"class_list":["post-28749","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-amazon","category-apple","category-artificial-intelligence","category-google","category-machine-learning","category-music","category-song","category-spotify","category-streaming-services","hck-taxonomy-organization-spotify","hck-taxonomy-industry-music","hck-taxonomy-country-united-states"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2018\/","yoast_head":"\nHow Spotify Beat Apple, Amazon, and Google Using Machine Learning - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/how-spotify-beat-apple-amazon-and-google-using-machine-learning\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How Spotify Beat Apple, Amazon, and Google Using Machine Learning - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"In an era in which Apple, Amazon, and Google are dominating the technology world, Spotify has succeeded in besting all of them in the music streaming industry. 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