Master Thesis Business Administration – Strategic Management Can new players still compete with the giants? Analyzing the creation of new platforms and how their strategies change overtime in the music platform industry Author: Maikel Coeleman Student number: S4357736 Supervisor: Dr. S. Khanagha Second examiner: Dr. G.W. Ziggers Date: 25-8-2018 1 Table of contents 1. Introduction ......................................................................................................................................... 4 1.1 Problem Statement ....................................................................................................................... 5 1.2 Relevance ...................................................................................................................................... 8 1.3 Outline Thesis ................................................................................................................................ 9 2. Theoretical background ..................................................................................................................... 10 2.1 How to deal with the dilemmas of platform creation ................................................................. 10 2.2 Roger’s diffusion of innovations .................................................................................................. 10 2.3 First-, second- & late-movers ...................................................................................................... 17 3. Methodology ..................................................................................................................................... 18 3.1 Research Context......................................................................................................................... 18 Spotify ............................................................................................................................................ 19 Apple Music ................................................................................................................................... 20 Tidal ............................................................................................................................................... 20 Amazon Music Unlimited .............................................................................................................. 21 Google Play Music ......................................................................................................................... 21 3.2 Research design ........................................................................................................................... 22 3.3 Data collection & data sources .................................................................................................... 23 3.4 Data Analysis ............................................................................................................................... 24 4. Results ............................................................................................................................................... 27 4.1 The five platforms ....................................................................................................................... 27 4.1.1. Spotify .................................................................................................................................. 27 4.1.2 Amazon Music Unlimited ..................................................................................................... 29 4.1.3 Apple Music .......................................................................................................................... 30 4.1.4 Google Play Music ................................................................................................................ 31 4.1.5 Tidal ...................................................................................................................................... 33 4.1.6 Model ................................................................................................................................... 34 4.2 Factors ......................................................................................................................................... 37 4.3 Strategies ..................................................................................................................................... 44 4.3.1 From nothing to success ....................................................................................................... 45 4.3.2 What strategies lead to success ........................................................................................... 51 4.3.3. First- Early or late-mover ..................................................................................................... 55 5. Conclusion, Limitations and Discussion............................................................................................. 57 5.1 Conclusion ................................................................................................................................... 57 5.2 Discussion .................................................................................................................................... 59 5.3 Limitations and future research .................................................................................................. 62 2 6. References: ........................................................................................................................................ 64 Appendix................................................................................................................................................ 68 Amazon Music Unlimited data collection ......................................................................................... 68 Spotify data collection ....................................................................................................................... 77 Apple Music data collection .............................................................................................................. 96 Google Play Music data collection .................................................................................................. 108 Tidal data collection ........................................................................................................................ 120 3 1. Introduction A major development in business models in the past 20 years has been platforms. A study about platform envelopment has shown that 60 of the 100 largest companies in the world in market value earn at least half of their revenue from platform business models (Eisenmann, Parker & Van Alstyne, 2011). In 2016, Evans & Gawer researched that digital platforms have in total accounted for a market value of $4.3 trillion and an employment base of several million direct and indirect employees (Stummer. Kundisch & Decker, 2018). This shows how much platforms are being used and to what success. There is a lot of revenue to be earned by using these types of models, but the term “platforms” is still a largely unknown concept, because of the lack of research on the defining characteristics of these platforms (Täuscher & Laudien, 2017). A fitting definition for platforms is from the industrial organization perspective that claims: “Platforms can be conceptualized as interfaces – often embodied in products, services or technologies – that can serve to mediate transaction between two or more sides, such as networks of buyers and sellers or complementors and users” (McIntyre & Srinivasan, 2017, p. 143). The most successful companies, based on market share, utilize the concept of platforms very well, in order to earn at least half of their revenue by being a facilitating platform. This means that other companies should also be able to successfully utilize platforms in order to earn more revenue, gain brand reputation or increase their market share. However, it can be difficult to achieve these goals for companies that try to enter markets where platforms are important. “In platform markets, strong network effects and high switching costs often shelter incumbents from entry by standalone rivals” (Eisenmann et al., 2011, p. 1270). They also mention that in order to overcome those barriers, they have to be revolutionary in their way of being a platform (Eisenmann et al., 2011). Platforms are mainly created by ‘leaders of leaders’ and “approved generally by the consensus of the stakeholders of the organization, serve as the guiding force on broad areas of behavior” (Rubenstein, 2005, p. 190). When it comes to platform creation, six different patterns have been identified and are seen as the main strategies for platform creation: (1) Single target group, (2) platform staging, (3) subsidizing, (4) platform envelopment, (5) exclusivity agreements and (6) side watching (Stummer et al., 2018). These strategies have proven to be successful, but they are not universal. Other situations might ask for other strategies. Above all that, these strategies still fail to fix some of the issues of platform 4 creation (Stummer et al., 2018). Therefore it is interesting to look for other perspectives to look at platform creation. 1.1 Problem Statement A major issue occurs with the creation of new platforms. The ecosystems in where digital platforms exist are “the collaborative arrangements through which firms combine their individual offerings into a coherent, customer-facing solution” (Adner, 2006). For value