Most Important Story of the Week and Other Good Reads – 15 March 2019: Is Spotify the People’s Champion?

This week felt slow , but I’ll say this: March will end with at least one big story. Or two. Or three. So stay tuned for that. Meanwhile…

Most Important Story of the Week – Spotify and Apple Battle Over Fees

Technology duels sure are fun, aren’t they? On Wednesday, via press release, Spotify founder Daniel Ek went after Apple in the EU antitrust arena for being a monopoly. (And tattled on them to the EU regulators.) Apple responded back, also via press release, “Hey you’re the bad player you don’t pay artists.” Which is true: earlier in the week, Spotify was back in court to appeal a ruling that increased payments to songwriters.

More than anything, this story portends the forces that are looming future battles in the entertainment, communications, technology and media industries. Some of these skirmishes will undoubtedly benefit customers, but often, the consumers are just the pawns.

Force 1: Appeals to consumers

Customers aren’t going to decide if Apple Music can exist on Apple’s platform. But both Tim Apple Cook and Daniel Spotify Ek took their cases to the consumers with blog posts, that they knew would get picked up by every media outlet out there. And so they were.

It seems relevant that the companies at least feel the need to go to customers with their pitches. (Hey, Apple is raising prices!; Hey, Spotify is screwing artists!) When Standard Oil was marauding through the land, they just paid to bury negative stories. The techlash is real, and the companies who need to watch out are…

Force 2: Tech giants and aspiring tech giants

Monopolies make for strange bedfellows, and the smaller guys want to get in that bed. In this case, Apple sat out the lawsuit against artists, but in fairness to Spotify, they were joined by Google, Amazon and Sirius XM/Pandora in opposing paying songwriters more. I saw another article this week about Apple vs Facebook, previously Apple had gone to war against Amazon, and Google and Amazon fight regular battles too.

It really does feel like Pacific Rim, where giant jaegers fight giant kaiju, and the customers are just watching. A few massive companies wage battles over each other’s monopolies (or “industries” if you’re being generous). Meanwhile, a company like Spotify is too small to truly battle, but wants to be a fellow tech giant, but just isn’t big enough. So it turns to…

Force 3: Antitrust

Appeals to antitrust regulators is probably the new normal. The EU already has a very aggressive regulatory regime, and I don’t see it slowing down anytime soon. If a Democrat wins, especially certain Democrats, you could expect the same on this side of the Atlantic. Sure, Spotify is only doing this out of self-interest, but it could help the market and us as customers. (I haven’t written about the Elizabeth Warren tech breakup proposal yet, but I will, in an entertainment context.) Of course, Spotify doesn’t really care about antitrust behavior, it cares about…

Force 4: Fees

At the end of the day, Spotify just doesn’t want to pay 30% cut of subscriptions to Apple. Neither did Netflix, and they thought they were big enough so they dropped payments from the App Store. Clearly, Spotify felt the same way, but unlike Netflix they’ve felt the crunch on premium subscribers more. Which isn’t to say Spotify’s complaints aren’t legitimate–they are and echo Microsoft in the 1990s more than a little bit–but it doesn’t make Spotify the people’s champion. And these splits on fees are the new battleground for streaming music, film and entertainment in the next decade.

So that’s it: Spotify wants to keep prices low. Which is good for consumers, but their biggest cost is still…

Force 5: Costs for content

Which is why Spotify went to court to keep royalty payments low. This is the story to monitor: Spotify’s costs rise as its usage does. Spotify is doing whatever it can to get to profitability and positive cash flow. Whether that means fighting artists or fighting Apple, that’s what it’s doing. Hardly the people’s champion.

Other Candidates for Most Important Story of the Week

Meanwhile, everyone else was repositioning their troops in the #StreamingWars2019.

Disney is Ending the Vault

If I have a big unquantified rule, it’s this: content is king. Distribution is not. Unless you have a monopoly. That helps.

But otherwise, content is king. Netflix knows this, which is why they are spending a fortune to build stuff they alone will own. Meanwhile, of all the studios, Disney has the best film content. (TV we could debate.) And before streaming times, this content was so valuable they could hold it back from customers to inflate the value even further. They called this putting films back in “the vault”.

This is why I pitched that Disney should have called their streaming service “The Vault”. I mean, it’s like you get access to the thing that was secret for all those years. That’s a great deal, in my opinion. “Disney’s Vault”. It’s better than “plus”. 

Either way, we’re going to get those movies. Bob Iger announced that all of Disney’s animated films will be available for streaming when Disney +/Plus launches. On the one hand, that’s a ton of great content immediately. On the other, rotating content in and out is a way to keep people subscribed, which would have been my tentative recommendation. Of course, anyone can second guess anyone else’s strategy. And you never know when the vault could return.

Apple Prepares to Launch (or Announce a Launch)

This isn’t one story, but several. (And yes, the big day is the end of the month.) Apple is looking to win awards. (I understand the logic for buzz. Winning/getting nominated for Emmys and Oscars is easy with enough money.) Apple is trying to get HBO and other premium outlets on board. (I understand the logic for subscribers. If you want to replace TV, you need the biggest channels and brands.) Apple is meddling with TV decisions. (I understand why tech executives meddle…it’s what they do and everyone loves TV.) The question is what does this all add up to, which we will half find out on March 25th and fully find out TBD.

A Group Buys the YES Network (that includes Sinclar, private equity money, oh and Amazon)

Yes, you saw a headline that Amazon bought the Yes network. And they are the “lead” player, though no one knows the percentage breakdown. Still, it is news that Amazon has its first ownership in sports (though it’s Prime Channels business has quite a few sports OTT services and it had the NFL streaming and some other tennis streaming last year). But now it officially owns a sports channel, or part of one anyways.

DirecTV Now: New Prices and New Plans

DirecTV Now is offering new price tiers of $50 and $70, with 40 or 50 channels. Oh, and HBO, cause synergy. Still, even without HBO, I think all the vMVPDs may be losing mney right now. I mean, cable subscribers fees were astronomical for a reason. But even the $50 tier left out important programming like AMC, Discovery and Viacom. This caused the follow-on news that those three companies saw stock price decreases. Along with hints that DirecTV may lose the Sunday Ticket package from the NFL, I think no one likes AT&T’s strategy with DirecTV or DirecTV Now.

Data of the Week – Netflix and Daily Usage

I called this out on Twitter, but it’s worth it since it is one of my evergreen pet peeves. Averages are terrible. Distributions are great. Distributions tell you what a data set looks like; an average tells you one random number. So Netflix said that the average customer watches 2 hours per day on their service. Which I belive. But no one can tell me if that is the mean, median or mode. Does that matter? Absolutely. (Here’s my previous article on distributions. I need to write more on why they are so valuable.)

Long Read of the Week – Pitchfork on TikTok Not Paying Artists Either by Duncan Cooper

Given that I mentioned above how Spotify wants to pay artists as little as possible, it’s great to know they aren’t the only company out not paying musicians. I’ve been sitting on this article for weeks now, waiting for the right time to cite it. 

Update to Old Ideas – Other Proposals for How to Fix the Oscars

In Bloombergwho I found via Hollywood Elsewhere–Virginia Postrel proposes emulating the Pullitzer Prize and dividing up into a high and low category. She puts the threshold at 10 million tickets. Honestly, I like this, but think you could just get the nominees from both places, and then have them all compete in the same category. (I like hindsight awards too!)

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: