It was an early hero of the United States navy, Stephen Decatur, Jr., who gave the world the dubious chant of nationalist zealots, reportedly in an after dinner toast to,
Our country – in her intercourse with foreign nations, may she always be in the right, and always successful, right or wrong.
a notion which has horrified educated and sensible people ever since.
Along with much of the rest of our cultural and communication industries, music finds itself ever more beholden to a group of platforms which combine massive technical capability and the ability to operate at global scale. What happens to our world when more of our industry moves on to those platforms? GK Chesterton’s response to the jingoism of Decatur – “my wife, drunk or sober” – does not quite capture the indifference of the technology to the impact it has, or the awed helplessness with which we watch it reshaping our lives.
These platforms are now our central strategic challenge; how to service them and their users with our music in such a way as to shape a sustainable and profitable future for professional recorded music. We can see and measure the value that is draining from the surrounding ocean into these relatively closed ecosystems; with truly remarkable precision an EU study found during 2013-2015 that ‘137 Spotify streams appear to reduce track sales by 1 unit’, with an overall neutral effect on gross revenue. (Industry watchers will note the name Waldfogel on the cover – he’s got form in pushing an academic opposition to music industry lobbying.)
But they are competitors for the value of music as much as these platforms are customers. To understand this from music’s perspective with harsh clarity it’s only necessary to look at how playlists change the marketing game. In the last few years we have moved from offering people a choice of platforms to buy our music from, to competing for mindshare within each platform with no sense that we either can or should ask a listener to switch from, for instance, Apple Music to Amazon. We know they won’t not matter how much windowing we do. The wholesale price captures only part of this value as platforms find more scalable and profitable revenue in advertising and consumer data.
With a degree of complexity far beyond the old service or retail model these platforms are multi-sided business, which makes the challenge of servicing them and optimising our performance within them many times harder. At a technical level it’s no longer enough to set up some simple pricing and descriptive metadata, then drop the music and hope. More and more we are being offered continuous feedback on performance, and the tools to try to improve it. At a business level, competing within each platform while coordinating activity between platforms is becoming like three dimensional chess.
For an analogy we can look at the adtech industry, itself a direct response to the impact of big platforms on media and marketing. Within the platform economy adtech creates no new value from the attention of consumers, but rather chases and coordinates value within an already closed system. Funding for adtech businesses reached $3.2b a year in 2015, after 5 years of growth. That is a lot of pricing power being hypothesised in what is essentially a tertiary business sector.
In music we can afford a slightly different perspective, in that we can demonstrate the ability songs and recordings have to create new value. Apple’s colossal growth was at the very least seeded by the combination of great music and the iPod platform to unlock digital mobility, a transition that was partly funded by piracy as people filled up devices with illegal downloads. We need nevertheless to understand that we are essentially competing with our biggest customers to grab our share of the value that we jointly create with them, and we also need to build strategies that acknowledge the asymmetry of this relationship.
Put simply, they have more data about our music and the people who listen to it, and more brains and more computers to understand that data with than we ever will. This is not however an argument for ceding the platform advantage and simply becoming tied tenants. The same reach and scale that enables the platforms we work with is available on the supply side, and we have the distinct advantage of being able to create competition and diversity against the inherent conservatism of big tech.
To achieve this we need to take some simple but brave steps.
First we need to break down our own data silos, to level the data playing field. Big data is truly our friend here as data needs to be sufficient rather than complete for patterns to emerge that really can guide and inspire business decisions. But no single label’s data is remotely near sufficient, so we need an environment that incentivises and rewards sharing.
Next, we need to understand our competitive dynamics better, so we know when by fighting each other we are harming our whole industry. Many industries face similar strategic problems, and find ways of overcoming them, for example by forming standards bodies, or pooling intellectual property. Perversely music’s most collectivised parts – the collecting societies – are foot draggers in the world of open standards.
Finally, we can look at what really creates new value and expands the market, and reward and celebrate it. This means a degree of unbundling of the unholy trinity of rights, supply chain, and marketing, along with much more transparency, at least for interested parties. Observable and measurable excellence should be what we honour with awards; we can and should invest in and recognise real expertise in relevant fields.
None of these are easy, and all rely on music growing its own supply side platform ecosystem, as well as some parties reconsidering where they think their competitive advantage comes from. But we already do similar things in many areas of music, through collecting societies, through indie rights licensing body Merlin, through the standards consortium DDEX, and sometimes via trade associations. Strength, coordination and dynamism in the middle layer of the market will make a much better world for musicians and music lovers; it deserves our best efforts.