{"id":29598,"date":"2018-11-13T21:52:17","date_gmt":"2018-11-14T02:52:17","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage\/"},"modified":"2018-11-13T21:52:17","modified_gmt":"2018-11-14T02:52:17","slug":"spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage\/","title":{"rendered":"Spotify + The Machine: Using Machine Learning to Create Value and Competitive Advantage"},"content":{"rendered":"

The Issue of Music Discovery <\/b><\/p>\n

How many songs exist today? Though there\u2019s no consensus, the order of magnitude is estimated to be in the hundreds of millions. Added to this stock are the thousands of songs released each year. Due to this sheer volume of music, listeners are challenged to discover music they like. Additionally, some listeners don\u2019t know exactly why they like a particular song and may even prefer a broad range of genres. This is what makes stumbling upon a song or getting a recommendation from a friend so exciting. Song discovery has historically been aided by subjective sources such as DJs. In the 2000s, music streaming platforms such as Pandora relied on manual curation or tagging to drive their song recommendations.<\/span>1<\/span> Though better than discovering songs by pure luck, discovery aided by manual curation and tagging is ultimately tough to scale and can\u2019t provide truly individualized recommendations.<\/span><\/p>\n

 <\/p>\n

Launched in 2008, Spotify is the world\u2019s largest music streaming service with 159 million monthly active users across 61 countries.<\/span>2<\/span> At the time of the company\u2019s initial public offering (IPO) in April 2018, Spotify generated \u20ac4 billion in revenue and was growing 45% annually. Music streaming services have experienced outsized growth compared to the music industry overall (see Figure 1). Accompanying this rapid growth is intensifying competition as Pandora, Apple Music, Tidal, SoundCloud, Amazon, and Google all fight to attract new subscribers.<\/span><\/p>\n

 <\/p>\n

Figure 1<\/span><\/p>\n

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

Source: IFPI, \u201cGlobal Music Report 2018: Annual State of the Industry\u201d, <\/span>https:\/\/www.ifpi.org\/downloads\/GMR2018.pdf<\/span><\/a>, accessed November 2018.<\/span><\/p>\n

 <\/p>\n

Core to Spotify\u2019s strategy for winning in this crowded market is its ability to provide personalized recommendations and help users discover new music, which is enabled by its investments in machine learning. In its IPO prospectus, the company highlighted this strategy stating that it will, \u201ccontinue to invest in our artificial intelligence and machine learning capabilities to deepen the personalized experience that we offer to all of our Users\u201d and that \u201cthis personalized experience is a key competitive advantage.\u201d<\/span> Given Spotify\u2019s deep pool of data (200 petabytes compared to Netflix\u2019s 60 petabytes)<\/span>2<\/span>, the company is well-poised to create competitive advantage and provide users with a continually improving service.<\/span><\/p>\n

 <\/p>\n

Spotify\u2019s Machine Learning Strategy<\/b><\/p>\n

Spotify\u2019s strategy has consistently focused on machine learning. First, its machine-generated, personalized playlists such as Discover Weekly and Release Radar account for 31% of all listening on the platform compared to less than 20% two years ago<\/span>. The company employs three types of machine learning to enhance its recommendation engine: collaborative filtering, natural language processing (NLP), and raw audio models<\/span>1<\/span>. Through collaborative filtering, Spotify provides recommendations to users based on the preferences of users with similar tastes. With NLP, the company scours articles, blogs, and song metadata to generate \u201ctags\u201d associated with each song and compares those tags with those of other songs. The company also analyzes which artists or songs are frequently mentioned along with the song in question to refine the pool of song recommendations. Through raw audio processing, Spotify is able to identify commonalities between songs through their musical elements (e.g. tempo, time signature, key). While collaborative filtering and NLP allow Spotify to point users to popular songs they may enjoy, raw audio processing allows the company to make predictive suggestions for songs with very little user awareness. <\/span><\/p>\n

 <\/p>\n

Second, Spotify has bolstered its strategy through several acquisitions. In 2014, Spotify acquired Echo Nest at a $100 million valuation<\/span>3<\/span> strengthening its music recommendation capabilities. In March 2017, Spotify purchased Sonalytic which develops audio feature detection technology.<\/span>4<\/span> In May 2017, Spotify acquired Niland, a startup which provides more accurate music search and recommendation.<\/span>5<\/span><\/p>\n

 <\/p>\n

Finally, Spotify is exploring the use of machine learning to help artists compose songs. To do this, Spotify hired Fran\u00e7ois Pachet in the summer of 2017 to be the Director of the company\u2019s Creator Technology Research Lab. Though Pachet views machine learning as a complement to the artists\u2019 creative process, one could envision a future where Spotify uses its machine learning capabilities to compose its own original content based on its users\u2019 preferences.<\/span><\/p>\n

 <\/p>\n

Looking Ahead<\/b><\/p>\n

It is clear that Spotify is taking deliberate steps to improve its value proposition through investments in machine learning. Collectively, \u201cmachine learning\u201d and \u201cartificial intelligence\u201d are mentioned 15 times in the company\u2019s IPO prospectus<\/span>2<\/span>; an indication of the technology\u2019s importance to the company. The company should (i) continue to hire top data scientists to ensure that its recommendation engine remains best-in-class and (ii) expand its base of users and artists rapidly to widen the data set which feeds its recommendation engine.<\/span><\/p>\n


\n<\/span> Though it seems like Spotify is the market leader today in part due to its use of machine learning, how else can the company ensure that no other company sprouts up with a better algorithm to make personalized recommendations? How will Spotify, given its market clout, shape artists\u2019 process of new music creation?<\/span><\/p>\n

 <\/p>\n

Word count: 788<\/span><\/p>\n

 <\/p>\n

 <\/p>\n

References<\/b><\/p>\n

    \n
  1. 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, accessed November 2018.<\/span><\/li>\n
  2. Spotify Technology S.A., February 28, 2018 Form F-1. https:\/\/www.sec.gov\/Archives\/edgar\/data\/1639920\/000119312518063434\/d494294df1.htm#rom494294_4, accessed November 2018.<\/span><\/li>\n
  3. Ingrid Lunden, \u201cSpotify Acquired Music Tech Company The Echo Nest In A $100M Deal\u201d, TechCrunch, March 7, 2014, https:\/\/techcrunch.com\/2014\/03\/07\/spotify-echo-nest-100m\/, accessed November 2018.<\/span><\/li>\n
  4. Hugh McIntyre, \u201cSpotify Has Acquired U.K. Music Startup Sonalytic\u201d, March 7, 2017, Forbes, https:\/\/www.forbes.com\/sites\/hughmcintyre\/2017\/03\/07\/spotify-has-acquired-u-k-musicla-startup-sonalytic\/#a4c0c3f6fcbe, accessed November 2018.<\/span><\/li>\n
  5. Jon Russell, \u201cSpotify Buys AI Startup Niland to Develop its Music Personalization and Recommendations\u201d, TechCrunch, March 18, 2017, https:\/\/techcrunch.com\/2017\/05\/18\/spotify-buys-ai-startup-niland\/, accessed November 2018.<\/span><\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"

    Spotify’s use of machine learning is central to its strategy.<\/p>\n","protected":false},"author":11732,"featured_media":29599,"comment_status":"open","ping_status":"closed","template":"","categories":[346,2738],"class_list":["post-29598","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-machine-learning","category-spotify","hck-taxonomy-organization-spotify","hck-taxonomy-industry-music","hck-taxonomy-country-sweden"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2018\/","yoast_head":"\nSpotify + The Machine: Using Machine Learning to Create Value and Competitive Advantage - 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\/spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Spotify + The Machine: Using Machine Learning to Create Value and Competitive Advantage - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Spotify's use of machine learning is central to its strategy.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage\/\" \/>\n<meta property=\"og:site_name\" content=\"Technology and Operations Management\" \/>\n<meta property=\"og:image\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2018\/11\/spotify-logo-green-2017-billboard-1548.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"636\" \/>\n\t<meta property=\"og:image:height\" content=\"421\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage\\\/\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage\\\/\",\"name\":\"Spotify + The Machine: Using Machine Learning to Create Value and Competitive Advantage - Technology and Operations Management\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2018\\\/11\\\/spotify-logo-green-2017-billboard-1548.jpg\",\"datePublished\":\"2018-11-14T02:52:17+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage\\\/#primaryimage\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2018\\\/11\\\/spotify-logo-green-2017-billboard-1548.jpg\",\"contentUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2018\\\/11\\\/spotify-logo-green-2017-billboard-1548.jpg\",\"width\":636,\"height\":421},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Submissions\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"Spotify + The Machine: Using Machine Learning to Create Value and Competitive Advantage\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\",\"name\":\"Technology and Operations Management\",\"description\":\"MBA Student Perspectives\",\"potentialAction\":[{\"@type\":\"性视界Action\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Spotify + The Machine: Using Machine Learning to Create Value and Competitive Advantage - Technology and Operations Management","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage\/","og_locale":"en_US","og_type":"article","og_title":"Spotify + The Machine: Using Machine Learning to Create Value and Competitive Advantage - Technology and Operations Management","og_description":"Spotify's use of machine learning is central to its strategy.","og_url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage\/","og_site_name":"Technology and Operations Management","og_image":[{"width":636,"height":421,"url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2018\/11\/spotify-logo-green-2017-billboard-1548.jpg","type":"image\/jpeg"}],"twitter_card":"summary_large_image","twitter_misc":{"Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage\/","url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage\/","name":"Spotify + The Machine: Using Machine Learning to Create Value and Competitive Advantage - Technology and Operations Management","isPartOf":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website"},"primaryImageOfPage":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage\/#primaryimage"},"image":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage\/#primaryimage"},"thumbnailUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2018\/11\/spotify-logo-green-2017-billboard-1548.jpg","datePublished":"2018-11-14T02:52:17+00:00","breadcrumb":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/d3.harvard.edu\/platform-rctom\/submission\/spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage\/#primaryimage","url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2018\/11\/spotify-logo-green-2017-billboard-1548.jpg","contentUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2018\/11\/spotify-logo-green-2017-billboard-1548.jpg","width":636,"height":421},{"@type":"BreadcrumbList","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/spotify-the-machine-using-machine-learning-to-create-value-and-competitive-advantage\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/d3.harvard.edu\/platform-rctom\/"},{"@type":"ListItem","position":2,"name":"Submissions","item":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/"},{"@type":"ListItem","position":3,"name":"Spotify + The Machine: Using Machine Learning to Create Value and Competitive Advantage"}]},{"@type":"WebSite","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website","url":"https:\/\/d3.harvard.edu\/platform-rctom\/","name":"Technology and Operations Management","description":"MBA Student Perspectives","potentialAction":[{"@type":"性视界Action","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/d3.harvard.edu\/platform-rctom\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"}]}},"_links":{"self":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/29598","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission"}],"about":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/types\/hck-submission"}],"author":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/users\/11732"}],"replies":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/comments?post=29598"}],"version-history":[{"count":0,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/29598\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media\/29599"}],"wp:attachment":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media?parent=29598"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/categories?post=29598"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}