1.
a. The firms for which Spotify’s new business model is a threat are traditional music outlets, like record stores and chain retailers with music sections, and even online retailers like iTunes.

Even though record companies have also partnered with Spotify to distribute their music, it is possible that it will cannibalize their other channels of distribution, like brick and mortar retailers and even radio stations.

Radio stations, too, will be drastically affected by an increase in the success of Spotify’s new business. While people listening to AM and FM radio, or even Internet radio stations, generate revenue for the radio stations by creating an advertising audience for local and national advertisers, Spotify’s success will certainly steal market share for broadcast listeners.

Less obvious examples of businesses that might be affected are television stations, because an increase in control of music choice might increase music listenership and take away from television viewing.

b. An example of this from history is how iTunes changed the music distribution model by making brick and mortar sales of music nearly obsolete. Record stores haven’t fared well in the 21st century because of the increase of sales in the iTunes store and other online retailers.

c. There are barriers to entry for other firms using the same business concept, because they, too, must negotiate contracts with record labels and figure out a revenue model that pays for the cost of royalties per song.

Also, since new firms aren’t first-movers, (or even second, or third), they must find a way to gain market share in a market that already exists, either by increasing value (i.e., by adding even more songs, or different songs), or by reducing advertising.

2.
Spotify’s new business model will not necessarily expand the model for music as far as increased listenership. This is