The literature suggests that in the presence of…positive feedbacks [from the Get Big Fast strategy], firms should pursue an aggressive strategy in which they seek to grow as rapidly as possible and preempt their rivals. Typical tactics include pricing below the short-run profit-maximizing level (or even below the cost of goods sold), rapidly expanding capacity, advertising heavily, and forming alliances to build market clout with suppliers and workers and to deter entry of new players. Intuitively, such aggressive strategies are superior because they increase both industry demand and the aggressive firm’s share of that demand, stimulating the positive feedbacks described above.
Limits to Grown in the NEw Economy: Exploring the Get big Fast strategy in ecommerce https://scripts.mit.edu/~jsterman/docs/Oliva-2003-LimitsToGrowthInTheNewEconomy.pdf
You may have seen that the UK Competition and Markets Authority released a report on music streaming in the UK. Of course, because the same players dominate the UK market like they do in France…sorry, I meant Germany…sorry I meant Canada…sorry I meant Sweden…sorry I meant the United States…how different could the competition issues be for US artists and songwriters? You have the biggest corporations in commercial history (Apple, Amazon, Facebook and Google) and the “get big fast” wannabes like Spotify (and Pandora in the US) on one side, the three major labels and the music publishing affiliates on the other side and the artists, songwriters, indie labels, indie publishers and especially the session musicians and vocalists squeezed in the middle.
Plus you have all of the biggest of Big Tech companies as well as wannabe Get-Big-Fast acolytes like Spotify and Pandora setting almost identical price points and freezing them there for a decade while refusing to exercise pricing power and nobody finds that just a trifle odd? Then in the grandest of grand deflections passing this off as the “pie” that everyone should look at instead of acknowledging that it’s the poptart served at the kid’s table in the nursery instead of the feast at the adult’s table in the dining room where the gravy bowls of shares of public stock are handed out dot-bomb style with a side of advertising barter. All while singing an apologia for payola and consumer welfare based on cheapness? You know there’s another way to get really, really cheap goods for consumers that ain’t quite so well received in history.
And yet somehow the Competition and Markets Authority passes this off as good for the consumer? With no meaningful discussion of the Malthusian and anticompetitive effects of the pro-rata model and pretty much summarily ignoring the actual revenue earned by “successful” artists in the beggar-thy-neighbor pricing and revenue charade. Not to mention the complete failure to discuss the supervoting stock at Spotify, Google and Facebook and all the other accoutrements of power that give Daniel Ek, Martin Lorentzen, Tim Cook, Sergey Brin, Larry Page, Mark Zuckerberg and Jeff Bezos control over the global music industry–pale males one and all and also looking pretty stale around the edges the singularity notwithstanding. And then there’s Bytedance and Tencent.
The logic of the CMA in avoiding these issues rivals the Warren Commission’s Single Bullet Theory. But makes total sense as the triumph of the lobbyists for the biggest corporations in commercial history. And sometimes you just might find you get what you need.
We will continue to dig into this latest report and its methodology as will others like Tom Gray, the dynamic founder of the hugely effective #BrokenRecord campaign that led to this investigation which is not over by a long shot. Tom had this reaction to a what’s next question and we take his guidance:
The CMA’s initial findings are:
the music market doesn’t have much competition;
the actions of the Majors and DSPs actively reduce that competition;
artists and songwriters are mostly, if not entirely, doing badly out of it;
but they accept the status quo using the narrowest paradigm of competition and its value to the consumer. It doesn’t go near the fact that the Majors used market power to create the very ‘norms’ the report resigns us to.
A difficult read: one which points to the weakness or indifference of national ‘authorities’ in the face of the gross expansion of multi-nationals unfettered by regulation. Monopolies should be broken to protect citizens and workers, not only to defend consumerism’s need of a saving.
What’s most ironic is you could take the CMA’s findings to a different authority with a more progressive outlook and get a completely different result. They simply don’t seem to have considered it their job to care about the hugely visible negative consequences of concentrated power on musicmakers.
If you would like to tell the Competition and Markets Authority what you think about their statements they want to hear from you.
The Trichordist 