Check the aggressive and invasive data sharing growth tatics orchestrated by the likes of Facebook, Amazon, Spotify, Netflix:
Facebook doesn’t want to tell us how its systems work. Amazon doesn’t want to tell us how its systems work. These companies are data mining us, sometimes in concert, to make uncomfortably accurate connections but also erroneous assumptions. They don’t want to tell us how they do it, suggesting they know it’s become too invasive to reveal. Thank god for leakers and lawsuits.
An oligopoly is a market form wherein a market or industry is dominated by a small number of large sellers.
This thrilling article on MBW reviewed Spotify’s Investor Day in March 2018. It became apparent that in demonizing labels as gatekeepers, Daniel Ek tries to camouflage his goal to become the last gatekeeper standing in the music business. Read what he said and compare to what it means:
The article says that Daniel Ek “doesn’t believe in gatekeepers – before laying down a thrilling, scene-stealing proclamation: ‘Our mission is to enable one million artists to live off their work.'” On the other hand Ek noted “that over 30% of consumption on Spotify is now a direct result of recommendations made by the platform’s own algorithms and curation teams – something he said ‘puts Spotify in control of the demand curve’.”
As Spotify excels at artist discovery for users, Daniel Ek feels “the need to nurture great talent is larger than ever before” as a platform. He continues to explain how this could be achieved: “We believe that great music and artists in the future will come from specialised talent incubators like the labels of the past – [which] brings opportunities for the next Berry Gordy, Rick Rubin or Ahmet Ertegun.” Yet it was also clear that Ek believes labels are gradually being forced to relinquish their ‘gatekeeper’ responsibilities.
I’ll come back to how Ek likes to see nurturing great talent when he speaks of “specialised talent incubators”.
Ek’s vision of a profitable business model
It is important to note, that his current business model differs a lot from his vision: “On Spotify, there will be more creators – and the number of creators that matter will also increase.”
To make the growing “material success of the top tier creators” happen – like Daniel Ek is telling his investors – at the same time as finally becoming profitbale, he has to pave a way for cutting costs.
Ben Thompson explained that for Spotify to become profitable it has to lower their marginal costs significantly and one way to achieve that would be to get rid of the labels.
Spotify could one day cut out the labels altogether — the idea certainly makes sense on a conceptual level. Spotify is in one sense an aggregator, in that it increasingly controls access to music listeners, and to the company’s credit, it has demonstrated the ability to exercise power via its control of music discovery and popular playlists.
The cited MBW article is ironically accompanied by banner ads for AWAL (artists without a label) that wants to allure independent artists. This is one of the “specialised talent incubators” Ek is talking about. “For too long, artists have had to go through the traditional gatekeepers to make a living from music. But now, a revolution for independence has begun. Join the movement.” So they say. But there is more: “We don’t accept everyone, so here’s what we look for in an AWAL member.” The digital distribution service elaborates in 5 paragraphs (this is no joke):
1. Strong Creative Quality
“Our seasoned A&R team searches for originality and the potential in an applicant’s music.”
2. Positive Engagements from Fans
“The ideal AWAL candidate should already have somewhat of an engaged fan base.”
3. Positive Engagement from the Media
“Our A&R team looks to evaluate candidates based on their reception in the media. Are you able to capture the attention of press and music blogs?”
4. Other Members on the Team
“Manager, Live Agent, PR/Publicist, Radio or club promotions company, Music Publisher, Lawyer. It’s not required for artists to have all these relationships to get accepted. However, in some instances we use the existence of these partnerships to gauge the potential an artist has to take their career to the highest point possible.”
5. Commitment to Your Brand
“We look to align ourselves with artists who are imbued with a certain level of professionalism. We specifically look for clear evidence of a well thought out marketing plan.”
This sounds awefully like AWAL wants to be a label without any chore or responsibility. When music labels are investors of artists they believe in, then “specialised talent incubators” like AWAL are merely selectors of already well known artists. A service like AWAL does not invest much in artists, so they can afford a lesser share from streaming platforms like Spotify, thus helping Spotify to lower their marginal costs. AWAL is not in any way a part of any music culture. Culture – a term that is not to be found in a meaningful way or simply as a word on their website.
It is not exactly groundbreaking analysis to note that Spotify has significant marginal costs — specifically, the royalties it pays the music industry (not just record labels but also songwriters and publishers). Spotify’s margins are completely at the mercy of the record labels, and even after the rate change, the company is not just unprofitable, its losses are growing.
The culture clash
Spotify’s freemium strategy completely changed the way of how people expect to be granted access to music: Everything got to be free at first and just to avoid inconvenient experiences like ads between songs people eventually change their behaviour to a paid flat rate account.
With artificial intelligence powered desire fulfilment Spotify raised the bar of the user experience even further: their playlist game seems to go very well with peoples’ needs as users continiously feed the machine what songs they like and when they skip. Spotify is about to become the ultimative gatekeeper of everyone’s listening demand for music.
At the same time Spotify succesfully de-contextualised the traditional way artists and labels previously connected to their fans: Formats like EPs and albums are losing their importance in favor to tactical placed playlists on the platform.
Now Spotify and the non-label “talent incubators” are outsourcing significant economic and cultural investment back to artists and even have the audacity to claim of “nurturing artists” – simply to make their own business work.
This neoliberal approach has serious consequences though. To become profitable Spotify requires an infrastructure of digital artist gatekeepers like AWAL just because they demand a lower cut from Spotify. These services however rely on artists who already became well known, are already well received by the media, are proven self marketers and ideally have a team of professionals in different trades to their support.
Who will these artists be? Who can afford to have a “team” of professionals around them to have the slightest chance of making it as a “top tier” earner on Spotify or elsewhere? What kind of music will pass through these gatekeepers? Will anyone make music that is new and innovative when gatekeepers looking for the popular formula?
Spotify and digital gatekeepers are basically supporting irresponsible artist self-exploitation to reach the acceptance level of being meaningful distributed at all. Or they are systematically nurturing rich kids’ music, simply because they have the headstart and can afford it.
Jimmy Iovine’s role at Apple Music became seemingly redundant because he held onto his vision to present and curate music from humans for humans in an age of rising capabilities of artificial intelligence and thus effective algorithms. In my opinion the final nail in the coffin was the aquisition of Shazam by Apple at the end of 2017. Apple may be felt left behind in the area of AI and Shazam can make articial intelligence products and services like HomePod in combination with Apple Music much smarter than before. It also means that human expert music curation is visible on Beats 1 Radio only.
Let’s look at Eddy Cue (Apple Senior Vice President who oversees Apple Music) in 2014 when he explained the Beats deal:
Eddy Cue cited three major reasons for the aquisition of Beats back then:
people: incredible talent of Jimmy Iovine, Dr Dre & team
product: incredible headphones
service: beats music – first subscripition service done right due expert curation
Mr. Iovine is one of the last of a team of prominent music executives Apple gained when it bought Beats Electronics LLC in 2014 for $3 billion. Former Chief Executive Ian Rogers, Beats co-founder Dr. Dre and Nine Inch Nails frontman Trent Reznor, another top Beats executive, have all left or distanced themselves from the company since the Apple deal, people familiar with the business said. Beats President Luke Wood, who oversees the headphones business, remains.
The headline of the article is subtle as a sledgehammer: “Jimmy Iovine’s Planned Exit From Apple Music Raises Leadership Questions”.
Dylan Byers: Let’s talk what was formerly the core product of Apple which is music. Spotify is going public. Do you wish that you had sort of nip Spotify in the bud several years ago? I mean they do have a crazy subscriber base I think it’s double what you guys have at Apple music?
Eddy Cue: Look we have 38 million subscribers and we don’t talk about our trials and these are people that given us their payment method, estimated we have 8 million trials I don’t know how quite what the numbers were, that is really not that important.
Dylan Byers: What is important?
Eddy Cue: When you look of the numbers of subscribers that Spotify and us have together and you look at the number of people that are listening to music around the world or even something as simple as the number of people that come to visit our App store every week, we have half a billion people that are visiting the App store every week and now you are talking about just north of 100 million music subs – we’re like THIS big in the scheme of things. So the real opportunity for music and it’s not about Spotify or us or the labels it’s about artists, is how they get their music to everyone around the world and how they get compensated for that. That is what we’re trying to do. We both have to grow by significant amounts in order to get the numbers in which it should.
Eddy Cue didn’t even blink at “formerly the core product” of Apple, says numbers aren’t important but then again are, didn’t explain how Apple is supporting artists in any way better than Spotify let alone how to grow subscriber numbers.
The number one reason why Apple Music is adopted well in the United States is not because of a subscription service done right (formerly known as Beats) but rather it comes pre-installed (WSJ):
Apple’s music business has been gaining momentum and is poised to overtake rival Spotify Technology SA this year in U.S. paid subscribers. That is mostly because of Apple Music’s reach across many of Apple’s 1.3 billion devices world-wide—on which its app is included by default—rather than the exclusive content agreements delivered through Mr. Iovine’s close relationships with artists, according to music-industry executives.
So if it is not the superior user experience of Apple Music that will win people over, what is it? And who at Apple has the vision “to grow by significant numbers”? Jimmy Iovine’s job at Apple Music is vacant (WSJ):
Mr. Cue now will have to determine whether to continue dividing responsibilities between Messrs. Kondrk and Robbin, elevate one to a more public role, or look externally for someone with music-industry ties to assist with artist relationships.
It is really worth watching how many hopes Eddy Cue had in 2014 at the Recode Conference about the aquisition of Beats. He lost the team, he still has the headphones (which are overshadowed by Apple’s HomePod and AirPods), he has a music subscription service that turned from human curation to integrating Shazam’s AI capabilities. There is simply no place anymore for the Defiant Ones at Apple (produced by HBO and not Apple’s video division).
It is also worth reading what Trent Reznor said, one of the championed cultural gatekeepers that Jimmy Iovine tried to introduce to Apple in line with the Beats deal:
For a couple of years, it’s been full time at Apple immersing myself in this extremely interesting stuff, and doing that has helped me realize how much I appreciate being an artist and how valuable time is.
Spotify is in one sense an aggregator, in that it increasingly controls access to music listeners, and to the company’s credit, it has demonstrated the ability to exercise power via its control of music discovery and popular playlists.
Being a true aggregator, though, means gaining power over supply; Spotify doesn’t have that — the company doesn’t even have control over its marginal costs — and it’s hard to see where the profits come from.
There is one more possibility: Spotify could one day cut out the labels altogether — the idea certainly makes sense on a conceptual level.
The marginal costs Thompson is referring to are the royalties it pays the music industry (not just record labels but also songwriters and publishers).
For Thompson, the promising inevitability to make “Everything as a service” is based on the idea of a new service-based economy that deprioritizes ownership in favor of renting what you need when you need it. He cites sharing services in industries like software, cars, homes and music as examples. As long as consumers frictionless discover these services, access them in a low-threshold way and start using them as ubiquitous commodities it should all be fine and dandy. Spotify as a music streaming service does meet all these consumer friendly criteria on the surface. Below that it is a bloody mess of fake charts, major labels as stakeholders infight, black market for playlists and lawsuits for not paying fair royalties.
Let’s recap: Lower marginal costs can only be achieved by cutting out the labels. Cultural decontextualisation of music is not a problem but a requirement for Spotify to overcome the missing profit potential. Cutting out labels means getting rid of a huge part of marginal costs but also of the cultural bottle neck so everybody can upload music. This inevitably creates a bubble where music and music making gets devaluated even more.
Jimmy Iovine’s time at Apple Music is coming to an end by August 2018. Hits Daily Double rumoured it first with Billboard confirming it today. Let’s recap Iovine’s self-introduction at the 2015 WWDC:
“This is a revolutionary music service curated by the leading music experts who we helped hand pick,” said Jimmy Iovine, Co-Founder of Beats Electronics and Beats Music. “These people are going to help you with the most difficult question in music: when you’re listening to a playlist, what song comes next.” As stated by Trent Reznor, one of Apple Music’s spokesmen, the overall intent of Apple Music is to grow, nurture and sustain careers, while more specifically shaping one shared conversation around music.
The Forbes article is highly recommended as it reflects exactly his differentiation approach for a flat rate music streaming service that Iovine sold to Apple with the aquisition of Beats Music in the first place:
The service combined algorithm-based personalization with expert music suggestions from a variety of sources.
His only asset was his connection to the major music elite and to install them as gatekeepers. One of the championed gatekeepers was Trent Reznor (Nine Inch Nails), read what he had to say in Vulture about Apple Music in July 2017:
I’ve seen a lot, and it’s interesting to be behind the scenes and meet really cool, smart people that I highly respect. Now, and I’m not talking about Apple here: I’m not yearning to be a tech guy. Being in that world has made me realize the true value of being an artist. The economics of music aren’t what they should be, and the culture isn’t giving the arts its fair due, but humans are always going to respond to emotion and storytelling. I believe that as much as I ever did. More, even. (…) I had all this shit in my head about how people listen to music and consume music. For a couple of years, it’s been full time at Apple immersing myself in this extremely interesting stuff, and doing that has helped me realize how much I appreciate being an artist and how valuable time is. (…)
Do you feel like you’ve been successful with Beats and Apple Music as far as working on subscription streaming?
Without going into detail, I’ll say it’s been an education. I’ve been on the other side of artists bitching about payments and free music, and I agree with those arguments, but you can sit and bitch about the way things are, or you can try to affect some change. Working under the Apple umbrella, I have a unique opportunity to work on a streaming service from the inside. I thought I could help set a precedent where artists could actually be paid and the fans could feel like they were dealing with a service run by people who actually care about music.
Is it working?
It’s been interesting. Where it seems to have wound up is that free music is here to stay. It doesn’t seem like, with all the different services, artist payments are coming together in the way that one would hope, but the data is valuable.
It’s not that he claimed any accolades as a gatekeeper, does he? More like he as an artist sobered up in the environment of Tim Cook, the technocrat that runs the most successful company on earth.
Bent Thompson wrote in October 2017 a remarkable article headlined Goodbye Gatekeepers, he concluded:
Most importantly, though, the end of gatekeepers is inevitable: the Internet provides abundance, not scarcity, and power flows from discovery, not distribution. We can regret the change or relish it, but we cannot halt it: best to get on with making it work for far more people than gatekeepers ever helped.
Now add the news from December 2017 when Apple bought Shazam and it felt very much, that indeed the time of the gatekeepers where over: Shazam is Apple’s Echo Nest.
Apple’s weekly active user (WAU) penetration is far behind Spotify’s, indicating that Apple needs to do a better job of engaging its users. Better playlists, recommendations and algorithm driven curation all help Spotify stay ahead of the curve. Now, Apple will be hoping that Shazam will provide it with the tools to start playing catch up.
Frictionless, automatic discovery based on user behaviour and massive data is what makes the Spotify world go around and the culture-disconnected individual defenseless.
In a way Jimmy Iovine had it right, when he insisted on the importance of “the most difficult question in music: when you’re listening to a playlist, what song comes next.” He believed in the gatekeepers but the algorithms have won.
The shrinking visibility of fanzines, music blogs and media platforms through forced paid distribution models on Facebook, Instagram etc. is building a cultural demise which nobody really was or is looking for. Yet the clever discovery algorithms of Spotify, Apple Music etc. win over the overworked, context-disconnected indiviual in a heartbeat because we like to be surprised by the machine. The flatrate streaming services bid to remodel an industry lies in the instantaneous magic of converting your preference, an unprecedented amount of data and “human-machine technology” to quantify your tastes – forever.
We should call this what it is: the automation of selling out.