Microsoft is cool again.

12

October

2017

5/5 (1)

Microsoft was founded by Bill Gates and Paul Allen on the fourth of April in 1975. They started the company with the vision: ‘A computer on every desk and in every home’. Something what was seen as very ambitious during that time, but nowadays we could not even imagine not having one. (Bright, 2015); (Microsoft, 2017)

In 2014, Satya Nadella became the new CEO of Microsoft and with this the vision and mission of Microsoft changed as well. No longer is the company striving to have ‘a computer on every desk and in every home’, but the new vision is to build ‘A mobile-first, cloud-first world’ and to ‘Empower every person and every organisation on the planet to achieve more’. (Kim, 2015)

Nadella: ‘Our strategy is to build best-in-class platforms and productivity services for a mobile-first, cloud-first world. Our platforms will harmonize the interests of end users, developers and IT better than any competing ecosystem or platform. We will realize our mission and strategy by investing in three interconnected and bold ambitions.

  1. Reinvent productivity and business processes
  2. Build the intelligent cloud platform
  3. Create more personal computing

These ambitions utilize a unique set of assets that span productivity services, cloud platform, our device platform and our family of devices. There is an explicit path dependence on how we achieve the “inter-connectedness” between the various elements of our strategy to gain momentum.’ (Kim, 2015); (Microsoft, 2017)

So, Microsoft has changed from a product company to a service company. And in order to realize its mission and strategy, Azure (the Microsoft cloud) is probably the most important service it currently offers. (Sawhney, 2016)

But by entering the cloud computing market, she has taken on the battle with Google and Amazon.  And although, from a market share perspective, Amazon is still dominating the cloud computing market with its Amazon Web Services (AWS), but Google and Microsoft are showing higher growth rates in the first quarter of 2017. So the question arises: is Microsoft going to be able to continue this growth and dethrone Amazon? (Titcomb, 2016); (Miller, 2017)

Well, if we have to believe Nadella, Microsoft’s ‘AI supercomputer’ is going to set it apart from its competitors. He is convinced that its competitors are not that advanced in working out how software could interact with people on a seemingly human level. And because of that fact, that Azure will become the first artificial intelligence supercomputer in the world. (Smith, 2016); (Rathnam, 2017)

But like Microsoft, Google and Amazon have also seen the value AI can bring to their cloud and they have taken actions as well. Google has been working on advanced machine learning plans to get more customers on its cloud platform and is now also making plans to further its AI plans by entering an open-source library (Tensorflow). Similarly, Amazon is making contributions to its cloud as well. It has revealed it is going to offer AI-based services, genomics, molecular modeling, and more. Therefore, Microsoft has to move fast if its wants to be dominant in the AI market and beat Google and Amazon in ‘the battle of the cloud’. (Rathnam, 2017)

But one thing is for sure: Microsoft is cool again.

 

 

Bright, P. (2015) Microsoft has a new mission statement, and it’s basically the same as its old one [online] Arstechnica, Available at: https://arstechnica.com/information-technology/2015/06/microsoft-has-a-new-mission-statement-and-its-basically-the-same-as-its-old-one/ [Accessed 10 October 2017]

Kim, E. (2015) Microsoft has a strange new mission statement [online] Business Insider, Available at: http://www.businessinsider.com/microsoft-ceo-satya-nadella-new-company-mission-internal-email-2015-6?international=true&r=US&IR=T [Accessed 10 October 2017]

Microsoft (2017) Facts About Microsoft [online] Microsoft, Available at: https://news.microsoft.com/facts-about-microsoft [Accessed 10 October 2017]

Miller, R. (2017) AWS won’t be ceding its massive market share lead anytime soon [online] Techcrunch, Available at: https://techcrunch.com/2017/07/28/aws-wont-be-ceding-its-massive-market-share-lead-anytime-soon/ [Accessed 10 October 2017]

Rathnam, L. (2017) Microsoft’s lofty cloud goal: make azure the first AI supercomputer [online] Techgenix, Available at: http://techgenix.com/azure-the-first-ai-supercomputer/ [Accessed 10 October 2017]

Sawhney, M. (2016) Putting products into services [online] HBR, Available at: https://hbr.org/2016/09/putting-products-into-services [Accessed 10 October 2017]

Smith, P. (2016) How Satya Nadella is making Microsoft cool again, and taking on Apple and Amazon [online] Financial Review, Available at: http://www.afr.com/technology/technology-companies/microsoft/how-satya-nadella-is-making-microsoft-cool-again-and-taking-on-apple-and-amazon-20161118-gssfb1 [Accessed 10 October 2017]

Titcomb, J. (2016) Cloud wars: Google, Amazon and Microsoft battle to own the future of computing [online] Telegraph, Available at: http://www.telegraph.co.uk/technology/2016/03/25/cloud-wars-google-amazon-and-microsoft-battle-to-own-the-future/ [Accessed 10 October 2017]

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Is Spotify really saving the music industry?

12

October

2017

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If we have to believe Forbes, the music industry is still not doing so well: ‘According to a report published recently by the RIAA (the Recording Industry Association of America) evaluating the state of the music industry at 2017’s halfway point, paid digital downloads are suffering the most, declining at a faster rate than even physical products, which many declared dead years ago.’. (McIntyre, 2017) Strange, because other sources are claiming that the music industry is on her way back. Bloomberg for instance states: ‘The music business is booming again after nearly two decades of decline, thanks to paid streaming services Spotify and Apple Music, according to a report from the Recording Industry Association of America.’. (Bloomberg, 2017)

So how well are things going? Are streaming services, like Spotify, really saving the music industry or is this just a fairy tale?

If we only look at paid subscriptions, the industry is doing pretty well. Spotify and Apple Music have been able to convert millions of people who before did not spend any money on music into paying subscribers. As a result, the sales of paid subscriptions have increased with (at least) $650 million. Moreover, in the first half of 2017 streaming was responsible for 62 percent of the sales. (Shaw, 2017), (Helmore, 2017)

But this is still just a little fraction of what it used to be when the industry was at its best. This gap, called the ‘value-gap’ by RIAA, should be filled by advertising-supported streaming. However, this type of streaming is lagging behind. Not only at Spotify but also at for instance YouTube. (Shaw, 2017)

More importantly, neither Spotify or its rivals have been able to report a profit. In 2015 Spotify reported an operating loss of $195.5 million, which was even higher than the year before when they reported a loss of $165.1 million. (Shanley, 2016)

Parson, a general partner at venture capital firm Northzone, explains these losses by the fact that the focus of Spotify has been on growing instead of being profitable. Since the initial costs for music royalties have to paid every time Spotify enters a new market and it is not able to get revenues from advertising and subscriptions from each additional subscriber right away, it is not strange that they have reported such big losses. Moreover, as Parson also states, if Spotify decides to change its focus on profit instead of growth, it can take full advantage of these unit economics. (Shanley, 2016)

But not everyone agrees with the point made by Parson. For instance Gerber, he states that Spotify (and its rivals) could only become profitable by rising (maybe even doubling) their prices. (Gerber, 2017)

To conclude, the music industry is definitely doing better at some points. Spotify is certainly playing a significant role. But the industry has still a long way to go, to get where it was at its peak. When it comes to paid subscriptions, things are going well and substantial revenues are generated. The problems are in ad-supported streaming, which is lagging behind. The gap that ad-supported streaming has to fill is still enormous, and the question is if companies as Spotify are able to fix this. And moreover, if they able to become profitable businesses without losing customers by rising their prices.

Gerber, R. (2017) How The Music Industry Is Putting Itself Out Of Business [online] Forbes, Available at: https://www.forbes.com/sites/greatspeculations/2017/05/03/how-the-music-industry-is-putting-itself-out-of-business/#61864a48e57a [Accessed 09 October 2017]

Helmore, E. (2017) Spotify hopes going public will cement streaming as music’s future [online] The Guardian, https://www.theguardian.com/technology/2017/may/27/spotify-ipo-stock-market-daniel-ek [Accessed 09 October 2017]

Shaw, L. (2017) Music Industry Soars Into Year 3 of Recovery Thanks to Spotify [online] Bloomberg, Available at: https://www.bloomberg.com/news/articles/2017-09-20/music-industry-soars-into-year-3-of-recovery-thanks-to-spotify [Accessed 09 October 2017]

McIntyre, H. (2017) Report: Digital Download Revenue In The Music Industry Has Dropped By 50% In Just 4 Years [online] Forbes, Available at: https://www.forbes.com/sites/hughmcintyre/2017/09/21/report-digital-download-revenues-in-the-music-industry-have-dropped-by-50-in-just-four-years/ – 58f2d6c72823 [Accessed 09 October 2017]

Shanley, M. (2016) Spotify could become profitable in 2017 [online] Business Insider, Available at: http://www.businessinsider.com/r-exclusive-europes-biggest-tech-hope-spotify-starts-talking-about-profit-2016-12?international=true&r=US&IR=T [Accessed 09 October 2017]

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