Shady Spotify Schemes

Source: 123RF.com

The economic principle I’m exploring is “Because of scarcity, people choose.”

 My research question to help me study the economic principle is “What legal percussions do streaming services have to face when dealing with the music industry?”
 The article published in Billboard titled “Spotify's Delicate Balancing Act” demonstrates this economic principle by showing that artists are choosing services like Spotify because they provide greater revenue but streaming services are facing a backlash from major labels due to their market power and possible censorship. 

 First, it was reported that “Spotify had quietly been negotiating licensing deals directly with managers and independent artists.” What this really means is that artists are seeing that being exclusively partnered with Spotify may be a potentially lucrative deal for both: the artist gets a higher percentage of ad revenue and Spotify will get more traffic from dedicated fans. This raises the question of how much Spotify or similar sources could control licensed artists. Could they perhaps make a pay wall just to access the new album or single if you’re not already a premium member?

 Second, Billboard says that supposedly “[Spotify’s] relationships in the music industry, on the other hand, have soured. Missteps surrounding the company's hateful-conduct initiative in May raised concerns about censorship from artists and executives, for example, resulting in the policy being rescinded three weeks later.” What this shows is that even though Spotify may help the music industry overall, it is still treading a fine line of legal repercussions. In this example, artists with more risque material might have been blacklisted, effectively removing them from the platform.

 Third, an interview with a former major-label executive reveals how the industry really feels about Spotify: “Spotify is big enough now that artists, managers and labels will have to suck up to whoever is holding the key.” Spotify is no longer a small company with a few albums, they are a behemoth prized to win control over other music providers. Sure, Spotify might not have the power to become a label, but the are favored by the people which gives them huge leeway over the industry as a whole. The only reason they are putting up with each other is because of the law. Spotify can’t legally stop an unsultry artist from creating music but they can reject them from their platform if they see fit. But why would they? Money is money.

 In my next blog post I will research the question: How important is exposure of an artist compared to their actual musicianship? (Is getting heard better than making better music?)