The Taylor Swift-Spotify saga (2/2): value of distribution

The saying goes “content is king”, and if you take that literally it would suggest Taylor Swift’s decision to remove herself from music streaming service Spotify would leave the platform’s execs reeling with fear that consumers will abandon the platform because “king content” is no longer available. In a previous post, I highlighted the catastrophic challenges Aereo had experienced in circumventing the wishes of the broadcast networks to bring high valued content onto their platform. And yet again we’re seeing the same debate played out in the UK where the dominant rights holder for Premier League football, BSkyB has been forced to offer its channels on rival platform BT YouView on grounds of competition.

But if you look at total footprint of content, less than 1% has truly earned the status of “king”. And music offers an interesting case study with hundreds of thousands of artists (if not more) fighting for exposure, recognition and ultimately a slice of the action.

In the traditional non-digital world, distribution was the key to success – if you could get yourself into the record store it meant you sold, and if you secured primary shelf-space you sold well. And to win shelf-space, artists often turned to the radio as a means to break through.

The advent of digital has removed these barriers to distribution, allowing every artist to create their own website, YouTube channel and Twitter account to promote themselves (while simultaneously disintermediating the record store). The problem has shifted from one of distribution to one of discovery – how amongst the ‘noise’ of musicians (excuse the pun!) can an artist break through?

At the end of the day, both artists and the platforms they use are hunting for audiences, and so the question of whether the content or the platform carries the crown “king” is really down to the size, value and critically the loyalty of their respective audiences.

Sky and BT paid a fortune for Premier League sports rights because the audience the content commanded was both loyal and valuable. In other words the platforms believed audiences would follow the content irrespective of the cost, making platform decisions on the basis of the content’s availability.

A hark back to the days of Michael Porter reminds us that the balance of power in the value chain is determined by the strength of buyers relative to the strength of suppliers. It’s a difficult theory to apply to the media industry because arguably no one supplier is able to deliver a truly substitutable product to another – no one piece of content is the same. But this level of substitutability is relative to the loyalty of audience base – for many, music offers entertainment value which can be equally satisfied listening to a range of different songs, none of which on their own are critical to the experience. In this example, there are a wide range of artists that could be regarded as substitute suppliers in delivering entertainment.

Compare that to the buyers in the market – the digital music platforms – where there are very few commanding a sufficiently large audience to be regarded as comparable buyers.

Until now, digital music platforms haven’t faced too many questions over who wears the “king” crown. There have been a few bumps in the journey – e.g. Radiohead, The Beatles and AC/DC have all shunned Spotify, but with limited negative impact on the platform’s growth. The problem for musicians is that on their own, very few have sufficient power to shift audiences from one particular platform to another.

At the end of the day it’s all down to a negotiation between how much you need the platform and how much the platform needs you. While you’re a relative newbie, discovery is everything. Only once content has been discovered and built up a loyal fan base can you really take on the title of “king”.

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