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But in terms of unit economics, the bigger artists/labels (or the artists that bring more users) are responsible for funding the entire platform, no? In other

by braza 3y ago

But in terms of unit economics, the bigger artists/labels (or the artists that bring more users) are responsible for funding the entire platform, no? In other words: A small artist can _bring_ users to the platform, fair enough, but the platform that gives access to other artists and enables that needs to take the bigger share.

Retric 3y ago
No, users are funding the platform not artists. If someone doesn’t listen to major artists then revenue from them shouldn’t go to said creators. Spotify however wants to maximize its cut and so has incentives to shift money from less popular artists if it can entice major labels to its platform. This has absolutely nothing to do with what’s fair, it’s simply about profit maximization and reducing the risks of competing platforms.
- braza 3y ago
  > If someone doesn’t listen to major artists then revenue from them shouldn’t go to said creators. Well I do not have the numbers here, but I would argue that this is definitely not the case in reality. > Spotify however wants to maximize its cut and so has incentives to shift money from less popular artists if it can entice major labels to its platform It’s the other way around, because the platform has competing interests: Spotify wants to have the labels to sell an “optionality” to the users (I.e. get the money from subs) but in terms of reproduction/execution Spotify wants to reproduce the maximum of podcasts and/or long tail artists because in those 2 cases Spotify does not spend a single penny. The labels has a very high bargaining power over Spotify due to its catalog, so as expected this is the biggest expenditure. That’s one of the reasons why Spotify is desperately pushing podcasts like crazy.
  - Retric 3y ago
    > this is definitely not the case in reality. Agreed. Major labels have leverage which they use to get a larger slice of that 70% than they would otherwise make in a ‘fair’ split.
mptest 3y ago
>are responsible for funding the entire platform, no? No, they all are. I wouldn't be a subscriber and I doubt many others would be if they only had the "top" artists that "are responsible for funding the entire platform". Go through your playlist for a minute and find how many artists aren't "the big ones" and ask yourself if you'd use the platform if the small artists weren't included. The whole point of spotify is ALL music, so ALL music is important, surely?
- braza 3y ago
  Articulating a bit more in depth: Spotify it’s a multi sided marketplace where on the artist side will have a very big power law where the big labels (that has a catalog power) brings most of the users. What sustain the economics on the Spotify is its catalog that is a composition of the labels catalog + long tail artists and their podcasts also. When users goes to the Spotify, they are paying not to support their favourite artist but to be able to access the platform, that occasionally will have their long tail artists. > The whole point of spotify is ALL music, so ALL music is important, surely? Not necessarily. Catalog + Network effects + Marketplace is important. What you’re describing in your argument is that “since you’re in the platform due to the artist, it’s fair that this artist receives the 70% of your money”. The flaw here is that this artist is benefiting of a marketplace and all its infrastructure and distribution without paying and the whole point of the platform is to give access to its catalog. Think on the Spotify price as some kind of “optionality fee”.

by braza 3y ago

Retric 3y ago

No, users are funding the platform not artists. If someone doesn’t listen to major artists then revenue from them shouldn’t go to said creators. Spotify however wants to maximize its cut and so has incentives to shift money from less popular artists if it can entice major labels to its platform. This has absolutely nothing to do with what’s fair, it’s simply about profit maximization and reducing the risks of competing platforms.

braza 3y ago
> If someone doesn’t listen to major artists then revenue from them shouldn’t go to said creators. Well I do not have the numbers here, but I would argue that this is definitely not the case in reality. > Spotify however wants to maximize its cut and so has incentives to shift money from less popular artists if it can entice major labels to its platform It’s the other way around, because the platform has competing interests: Spotify wants to have the labels to sell an “optionality” to the users (I.e. get the money from subs) but in terms of reproduction/execution Spotify wants to reproduce the maximum of podcasts and/or long tail artists because in those 2 cases Spotify does not spend a single penny. The labels has a very high bargaining power over Spotify due to its catalog, so as expected this is the biggest expenditure. That’s one of the reasons why Spotify is desperately pushing podcasts like crazy.
- Retric 3y ago
  > this is definitely not the case in reality. Agreed. Major labels have leverage which they use to get a larger slice of that 70% than they would otherwise make in a ‘fair’ split.

mptest 3y ago

>are responsible for funding the entire platform, no? No, they all are. I wouldn't be a subscriber and I doubt many others would be if they only had the "top" artists that "are responsible for funding the entire platform". Go through your playlist for a minute and find how many artists aren't "the big ones" and ask yourself if you'd use the platform if the small artists weren't included. The whole point of spotify is ALL music, so ALL music is important, surely?

braza 3y ago
Articulating a bit more in depth: Spotify it’s a multi sided marketplace where on the artist side will have a very big power law where the big labels (that has a catalog power) brings most of the users. What sustain the economics on the Spotify is its catalog that is a composition of the labels catalog + long tail artists and their podcasts also. When users goes to the Spotify, they are paying not to support their favourite artist but to be able to access the platform, that occasionally will have their long tail artists. > The whole point of spotify is ALL music, so ALL music is important, surely? Not necessarily. Catalog + Network effects + Marketplace is important. What you’re describing in your argument is that “since you’re in the platform due to the artist, it’s fair that this artist receives the 70% of your money”. The flaw here is that this artist is benefiting of a marketplace and all its infrastructure and distribution without paying and the whole point of the platform is to give access to its catalog. Think on the Spotify price as some kind of “optionality fee”.