Apple the privacy company pushes you by all means to the privacy problem child Amazon Echo to promote their streaming service Apple Music via app store, website and push notification – all to get back their hardware on the Amazon shelves.
It seems that Apple can’t afford not to be on the biggest marketplace in the western hemisphere. In this move the vertical powerhouse sacrifices their own hardware – the HomePod – in favor of their now horizontal service Apple Music and also in favor of a hardware ecosystem that is in many ways contrary to the Apple privacy paradigm.
The strategy shift to content service growth comes without any leverage for the premium hardware maker that appears troubled – or why would they stop reporting unit sales for iPhone, iPad and Mac beginning 2019?
In 1957 Walter Ulbricht proclaimed famously to “overtake without catching up”. The state council chairman of the German Democratic Republic presented a catchphrase to persuade East German citizens, that socialist planned economy is the way to gain superiority without compromise against the capitalist West Germany. Well, we know that didn’t work out.
In the fight between the two biggest advertising networks Google decided in 2017 to take on Facebook with the announcement of it’s own timeline feed within the Google app. A year later Google elevated the Discovery news feed with user interests: the new Topic Layer on top of the Knowledge Graph turned Google Search from a pure pull-medium into a hybrid pull-push-medium. The feed works at the moment without user generated content or comments in contrast to Facebook.
Google wants marketers to understand that it can be part of push marketing beyond display advertising across the web. It’s just a matter of time until Google makes native advertising a part of the new passive serendipity feature.
Instead of pushing a new social network, Google+ ahem, Google expands it’s knowledge about user interests and user behaviour into an already existing platform that has became indeed a swiss army knife of all things digital. So with Discovery it leverages the passive feed ux mechanics of social network apps without the need to “connect people”.
This time “overtake without catching up” could work for Google in terms of regaining ad budgets from Facebook – if it is relevant and less noisy for that matter.
Owner tells revenue is up 30% in his spruced-up shop, equipped with artificial intelligence-backed apps and even a heat sensor to track foot traffic. (…) Among the central ideas is that in the future, shoppers will not view e-commerce and brick-and-mortar as distinct things, but as a single merged organism — as simply “commerce.” What Alibaba and rivals like Tencent and JD.com are doing is corralling businesses into branded, self-contained, AI-infused universes in which only their affiliates capture the profit.
In this phase of transformation Alibaba AI profits from getting a massive insight in shopping behavior. Shop owners profit from an expanding Alibaba digital ecosystem and are able to offer customers a convenient and superior shopping experience through recommendation and payment. These are the early benefits of becoming part of the Borg.
What if the next phase is about optimisation and consolidation? Will the shop owner still be part of the AI-ecosystem and what are the requirements?
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.
Cosmic Bridge label boss Om Unit hits Twitter with a question about the future of electronic music indies, being them artists or labels. Vinyl record manufacturing is too expensive for small editions to break even, digital music download sales are probably more and more limited to the small group of DJs and the hesitation to release music non-physical and streaming only is very palpable.
YouTube has asked musicians to agree not to disparage the streaming-video service in exchange for promotional support. In recent months, YouTube has given a handful of musicians a couple hundred thousand dollars to produce videos and promoted their work on billboards, part of a larger campaign to improve the site’s relationship with the music industry.
These agreements are common in business-to-business deals, but when dealing with artists they seem one-sided. This makes YouTube seem like they lack confidence in their own service. If criticism from musicians is apt, it’s wrong to suppress it. And if it’s not apt, why worry about it?
Question: A lot of people say that the music industry is moving toward music becoming free. Is that a viable model going forward?
Lyor Cohen: If it’s free, then how would record labels support paying their staff and signing new artists? I think it would be bad for culture and the art if artists and people who develop the apparatus to support those artists don’t get paid.
Cohen is responding to the skepticism by promising financial support for videos, promotion for new releases and a crackdown on free music. He’s developed a sales pitch for meetings with artists, managers and label bosses: “We’re going to make you rich and famous.”
“So it takes time. It takes the observation of how your children are consuming media. I don’t think there’s a person in this room that doesn’t recognize that the advertising business is rapidly transitioning and the money is moving from traditional media to digital. It just takes time.”
So no real actual strategy from a former label manager on how to change YouTube’s Freemium Business Model other than bypassing labels and going directly to artists.
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.