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Spotify Technology SA wants to be the next Netflix Inc. Both are pioneers in getting people to pay for a digital entertainment buffet—Spotify’s chief financial officer even had the same job at Netflix.   But the economics of music streaming are very different from video.

Source: Bloomberg

Date: March 27th, 2018

Link: https://www.bloomberg.com/news/articles/2018-03-23/why-spotify-can-t-scale-like-netflix

Discussion

1) “Spotify’s product—35 million songs—costs the company more as more people sign up.”  This means Spotify is subject to the same economics as regular manufacturers, not other digital companies.  Do you understand why Netflix can add 1 million new subscribers and have zero extra costs whereas Spotify adds 1 million new subscribers and it has 1 million new costs?

2) Just because Spotify is not like Netflix does not mean it is going out of business.  What other digital products cost more as more people use them?

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