Spotify’s A Dominant Player in the Relevant Market
There’s all kinds of rumors going around about the European Commission investigating whether major labels have somehow conspired with Apple to hurt Spotify and YouTube (owned by Spotify board member Google). How? By offering a music service without a free service based on the crack model. This theory has to do with Apple and the major labels having dominant market positions, and the EC’s alleged desire to protect Sweden-based Spotify.
Or so the narrative goes. There’s scant documentation of any such “probe” aside from a couple unattributed news reports based on “people familiar with the case“.
But if the European Commission is looking into Apple to protect Spotify, maybe they should be looking at Spotify itself. According to a Billboard report, a Spotify executive told the Google-dominated Music Biz Association (formerly NARM) that Spotify has 50% of the global music subscription market:
[Spotify executive Will] Page also pointed out that Spotify is half of the $1.5 billion global subscription streaming market. In the U.S. market, Spotify made up approximately 90 percent of last year’s growth in subscription revenue, according to Page.
Isn’t that special? So Spotify is at least a dominant company if not a monopolist in a very relevant market to the EC’s rumored investigations. Maybe while the EC is looking into the major label deals with Apple they could also look at Spotify’s behavior toward independent artists and control over the trickle of royalties from subscription?
And before Spotify tries to change the subject–we’re not talking about royalties paid by labels, we’re talking about royalties paid by Spotify to independent artists with no label. And if the royalties suck for independent artists, they must really bite for signed artists who have to share the revenue with their labels.
Why Do We Want Out of the Ad Supported Tier?
Here’s an alternative and non-conspiratorial explanation of why people want out of the free streaming tier–maybe it just sucks. How about that? And who is hurt by cutting out an ad supported tier? Advertising networks serving ads to Spotify, like, oh say Google Adsense. You know–Google, the Spotify board member.
The Google connection is actually very interesting. For all the bitching and moaning that Spotify does about YouTube, why would they put Google on their board of directors? A “freemium frenemy” perhaps? Maybe because Google has a strong interest in seeing that Spotify stays an ad supported business for a long time?
The reaction against the free tier is not just a reaction to Spotify, it’s also a reaction to YouTube and it’s mainly a reaction against ad supported streaming, a business model that is supposed to be a defense to ad supported piracy. You know, the ad supported sites that Google drives traffic to. Remember 350 million take down notices to Google search last year?
Frenemies Creating Another Compulsory “License”
Maybe the Spotify narrative is wrong. Maybe the real story is that the fight is between those who profit from the advertising model through a bunch of crappy deals with Spotify and YouTube that should never have gotten done in the first place. Maybe everyone is realizing that now and want out. Maybe Apple is taking advantage of that realization and is innovating and competing. Maybe Spotify is trying to use its dominant position in music subscription to throw its weight around in its “freemium” business and its “frenemy” and board member Google is in the background doing what Google does best: jacking artists around.
What is troubling about Spotify’s antics is that they don’t get a compulsory license for recordings, so they can’t quite screw us as hard as Pandora or SiriusXM do with the power of the federal government behind them.
But if Spotify can force the major labels to license to them for the free tier by manipulating the antitrust law, that means that Taylor Swift will not be able to withdraw from either Spotify or YouTube. And we suspect that’s the object of the exercise.
Don’t regulate the Internet except for the artists and the songwriters.