The past, present, and future of the musical commodity

28:57And Spotify being very Swedish and being very non-confrontational, not to make a generalization about Swedes, but it's what he spent a fair amount of time in Sweden. I think what it taught me is that strategy is actually downstream of culture. And the strategy, the right strategy, in my opinion, would be to be much more aggressive and to take on the labels head on. But Spotify culturally is just not that company. And to some degree, a lot of their success was built on the back of partnering with the labels, right? Like if you remember companies like GrooveShark, they ultimately got killed because they went around the labels.

29:30So Spotify has always had this DNA of working with the labels, but at some point they needed to shift that and they were really unable to do so. So in 2018, what ended up happening is that all of those programs at Spotify got killed. And right around the time is when they got a new chief content officer, Don Ostra. And Don basically said, if you don't want to sign those kinds of content deals in music, what if we did it in other forms of audio? Right. And that's when Spotify started spraying money to sign and basically buy up podcasts. So they bought Joe Rogan, Kimlet, The Ringer, Call Her Daddy.

30:05They bought Anchor to get other people to make podcasts. They signed deals with the Obama production company. They signed a deal with Prince Harry and Meghan. But I think you have to understand that that's why they did that is because they needed fixed cost content in order to have a much stronger gross margin. And they were unable and unwilling to do that in music. But my belief was and continues to be that the most effective strategy is just to do that in music itself. Wow. So they were really just like that dependent on Universal that they kind of became cornered and had to basically acquiesce to these demands.

30:40Yeah, but think about it from their perspective. If you've promised the end consumer every song they could ever want, and most people are listening to the big artists on the platform, imagine if Universal pulled Drake and Taylor Swift and their biggest artists, which is like the threat, right? Spotify felt like they had much more to lose if that happened than they had to gain by the other model, right? And so it's very similar to like the negotiations that happened between cable channels and cable carriers. Like, I don't know if you see that, but every two or three years, there's like a big war between like the Comcasts of the world and the Disneys of the world, let's say.

31:16One of those wars happened like very recently where the Comcasts of the world pay like carriage fees, right? They pay those content providers a certain amount of money per one of their subscribers. Like I think ESPN is the highest carriage fees, for example. And the reason why is because people who like sports are really into sports. And so if there's even a threat of pulling ESPN and somebody who loves football can't watch their football, they're going to blast Comcast, right? They're going to tweet about them. They're going to be livid in public in a way that's really bad for Comcast's bottom line.

31:51And so ultimately, what ends up happening is that there's this fierce protracted negotiation and that ultimately a deal gets done. Everybody's afraid of the nuclear option of what happens if this content is just yanked it happens every once in a while but spotify was too afraid and too risk averse to even let that happen right whereas that happened with netflix by the way like disney pulled the shows from netflix and netflix said like fuck you then like you know we're willing to take that risk that there's enough other content out there and we can find other content there to fill the vacuum right it's the same thing with like the office it was a big deal when the office left netflix right netflix said okay leave we'll figure it out we'll have no other shows we don't need you right right where spotify i think culturally because of the risk aversion of of swedes like i'm pretty convinced if spotify was based in los gatos or in the bay area the way that netflix is it would be a very different path wow yeah it's almost like by doing so they kind of like just cleaved themselves to have to have this like almost deferential to the powers that'd be bingo kind of like that's exactly right like this more like passive growth model right bingo bingo that's exactly right and it all stems from the two specific choices that they made very early on that were very short-term optimized but very long-term constraint right which is competing on volume and paying a variable cost of content

33:19Hey, pals. If you're enjoying today's episode, we want to remind you that the only reason why we're able to keep this podcast going is because of the generous support from listeners like you. If you can't shell out for a subscription, we understand. We know things are rough out there right now. But there's another way you can help us out, which is heading over to Apple Podcasts and leaving a rating and review. It literally takes only 30 seconds, and it actually goes a long way to helping people find us.

33:54Well, could you take us back in time a little bit to the beginnings of Spotify and how we ended up with this specific system? Like what about music in particular and the musical commodity songs, albums makes it so complicated to monetize on the Internet? Like the story obviously begins with file sharing and this original fear when file sharing took off that, you know, it would not be possible to monetize music at all. Right. Yeah. What's unique about the music industry and why it's so hard is the rights management and the fact that the rights are very consolidated. So something like 60 % of the songs that we listen to are owned by major labels, right?

34:37And so to some degree, you cannot have technological development without involving those major labels unless you're very clever or you have a very specific value proposition, right? That ignores major label music. But Spotify's value proposition was almost the inverse. It said we have every song you could ever want. And that, by definition, includes a lot of major label music. And that combined with them catering to a median or 50th percentile consumer who really only listens to major label music means that they were always going to be dependent on the major labels. So I think that's really the challenge.

35:09Music is a very consolidated IP rights management industry. And most startups don't understand that at some point they're going to have to interface with the labels. And they don't build their businesses in a way from the beginning in a way that they can not have to interact with the labels. I started my career in music or one of the jobs, I shouldn't say I started my career, but one of the jobs that I had was interning at SoundCloud in the summer of 2015. And it was a very similar world that SoundCloud operated in. SoundCloud got a lot of momentum and became pretty successful. But a lot of the music that was popular on SoundCloud were remixes of major label content.

35:47And so SoundCloud reached a certain level of size and the major labels were like, yeah, it's our time to make money from you, right? Like you're using our content, we're going to make money from you. So what ended up happening was that SoundCloud needed the major labels to agree to working with them. And so the major labels basically dictated the terms that SoundCloud took, again, because it was too late by that point. SoundCloud had already built an audience that kind of had already expected these remixes of major label content, right? And so the labels had all the leverage at that point, in part also because of the way that DMCA rules work, where it's a three strikes policy.

36:23And so what was happening on SoundCloud is that major producers and DJs on the platform with hundreds of thousands, if not millions of followers were getting their accounts nuked. And the labels were using that as a leverage, right? Because those DJs and producers were getting pissed off at SoundCloud, not understanding that it was the labels putting their foot on SoundCloud's neck. So I think that's really the challenge is understanding that you are going to have to interact with the major labels at some point if you don't build your business in a really intentional way and you don't build your value proposition to the end consumer in a really intentional way to circumvent the labels.

37:00So interesting. And, you know, I'm curious, like, in your opinion, is it even possible to make the traditional streaming model work better for independent artists? I know Uma, for example, has called for raising the royalty rate to a penny per stream. I think other platforms like Apple Music and Tidal do do that. But, you know, you can only go so far. Like, do you think that the model is just sort of incompatible with the things that artists need in order to thrive, not just financially, but also in terms of other downstream impacts on consumer behavior and musical scenes? I think Spotify's model is, Spotify is a unique company in that they're a pure play music streaming company, right?

37:50So they have to make the economics work for long-term sustainability. Apple, Google do not have to make the economics work for long-term sustainability because they can use music streaming as a loss leader to sell other products, right? With Apple, they can sell more iPhones, right? Google can put YouTube music in a bundle with YouTube to sell overall YouTube subscriptions. So I think it's really hard to be a volume-based, pure play music streaming platform. I think you either have to be pure play and not volume-based and be quality-based rather than quantity-based and model after video streamers, which don't seek to have every TV.

38:29Netflix doesn't tell you that they're going to have every TV show ever made, or they don't have every film ever made. Netflix tells you that they have shows worth paying attention to and good shows and quality shows, right? And so if you want to be pure play, I think you have to compete on that. If you want to be volume-based, then you have to be under the umbrella of a larger tech company that's using music to sell another product, which works, by the way. The reason why that works is because music fans are so passionate and music is so sticky and we all have a relationship to music that it's very easy to get people in a door using music and then sell them something else, right?

39:01So Amazon Music is the same thing, by the way. They're trying to sell you a prime bundle, right? And so they're bundling it into these non-music goods. So yeah, I think the model calling for a penny per stream for Spotify is just unrealistic in my opinion. I think you could call for it for Apple and Google and other platforms where it's not about making money for them. And the long-term viability of those platforms doesn't depend on those platforms making money. So I think that's really the challenge is you have to kind of choose one or the other. And Spotify chose both. They chose both to be pure play and to be quantity of consumption based.

39:37Yeah. And I think there's sort of a paradox there where, as you said, the independent music consumer is, you know, one of the most passionate kinds of musical consumers down to spend the most money. you know band camp is probably we're going to go talk about band camp but the passion that exists for the independent music fan is not being like fully explored or exploited this model i think that's exactly right spotify is built for like the median consumer the metaphor that i use all the time is that spotify is like the h &m of music right which is like h &m and zara and fast fashion sheen that's the most recent example it's good enough for a lot of people but the people who spend the most money on clothes are not the ones who are buying Shein, right?

40:23And so the most money to be made in business, at least in fashion, for example, is in LVMH and caring, right? Which is selling to the top 1%, 5 % of people who really care. And so, yeah, I think Spotify has chosen to be the H &M of music. For example, I remember when Spotify removed DMs. Spotify had DMs 2015, 2015, 16. I can't remember the year that they got rid of them. It really taken me back there. Yeah. And I used them all the time. All the social capital I had at that point in my life was music recommendations. So I would send music recommendations to so many people. And then they got rid of them.

41:01And I remember asking internally why they got rid of them. And the answer was something like only 2 % or 3 % of the Spotify user base uses this feature. So why would we continue to maintain it across engineering resources now why is that though is it like an awareness issue or was there just an assumption that this is like not what people want to be using this for it's just most people are passive uh you know there's like the 99 one rule of the internet right well 90 percent of people will consume nine percent will curate or engage and one percent will actively like create right um so i think Spotify understood those mechanics but my argument back then and continues to be that is the most valuable three percent or five percent right for two main reasons the first is that that top percent they're the ones who spend the money on music and that's where like the value actually can be captured right but then two and more subtly is that that top five percent they influence the other 25 percent right oh yeah they're like the the first domino of a lot of cultural shifts right it's the people who are really into certain media right like The people who are really into music are the ones that are ahead of the general public on music.

42:15The people who are really into fashion are the ones that are ahead of the general public on fashion. And they influence the general public on music, on fashion to some degree. So that was always the pitch. But Spotify, like I said, they built their business to be oriented both on quantity of consumption and quantity of consumers. It was like they were always interested in a breath, right? They're kind of like Walmart in that sense, right? Like Walmart is not trying to derive that much money from any one of its consumers. and they're trying to just have a shit ton of consumers, right? And that was the business model Spotify struck.

42:46And everything is downstream of that decision that they made. It's so interesting, yeah. I've always had this opinion, maintained an opinion for the last couple years just as a consumer that, like I think of when I was growing up and there was like the kind of music that you would hear on the radio and then there was the music that you would like have to find at the record store because it would not be on the radio, right? And I think that Spotify was sort of saying, oh no, all music can just be in this one place. But now I think my hunch is potentially that that is where it's headed to, it is only gonna be for a certain type of artist and that hopefully independent artists and technologists creating new platforms with them will be able to sort of divest from that system.

43:36Yeah, I mean, that's exactly right. Spotify has always aspired to compete with the consumer that listens to radio, which is a very passive experience, but a much broader base of consumers. And I just don't think that model is the effective model. Because if you look at the total amount of music spend, it's very much a Pareto law where the top 20 % are responsible for 80 % of the spend. And so it makes much more sense, in my opinion, to focus on the high end, the top end. again and you see this in other cultural industries also right like fine art is the same way right like the money is at the high end in fine art fashion is also the same way the money is at the high end in fashion right there is money to be made being h &m or she in but it's just a much different business that's much harder in my opinion so yeah i agree with the spotify as radio metaphor I was trying to think of like what the analogy for Bandcamp would be if we're running with the fashion line metaphor here, which I love.

44:41So, you know, if Spotify is H &M, maybe there's an argument that Bandcamp was maybe like the mod cloth. Yeah. Right. Like an independent sort of left of the dial fashion line that was eventually bought out. So if that's the case, you know, Bandcamp has obviously garnered this reputation as a more artist friendly alternative to streaming, though there's been the recent sale of the platform and mass layoffs. And it's been an upsetting reminder that it's really just a tech platform kind of like any other. What are the advantages of a model like Bandcamp for independent artists? And where do these kinds of models perhaps fall short as a permanent solution to the problem of artists needing a place to store and sell their work?

45:26Yeah, I have a lot of admiration for Bandcamp. I think they got a lot of things right. I think their focus on the independent artists, the types of artists that resonate with a connoisseur and the connoisseur consumer were all correct. I think what Bandcamp did not get right is that it's not just enough to appeal to the connoisseur, but you have to broaden the base of music connoisseurs and add new connoisseurs. And I think that's also where fashion does an immaculate job. You don't have to be like the biggest fashion head to know what Prada is and to want Prada, even if Prada also appeals to the fashion heads, right?

46:03And I think Bandcamp was kind of an echo chamber in a lot of ways, a really beautiful echo chamber, but an echo chamber nevertheless. And they weren't really interested in converting people who didn't care about music, either into caring about music or paying for music, right? And I think that's the name of the game, right? And again, that's what fashion does really, really well. You may not even care about clothes, but you want to look cool and there's a certain amount of status value. And I also think A24 and film is really effective in that sense. They've crafted a brand that stands for quality that appeals to people beyond the connoisseur, but also appeals to connoisseurs.

46:39They even just launched kind of a social network-y membership. Totally. Yeah, it has a cute name. It's like AAA24. Yeah, that's good. That's good. It's very good, yeah. Yeah, and I think that's what music has not learned. in a way that other cultural industries have is you need a brand that appeals to the connoisseur and pulls people in who are not connoisseurs because they want to look like they're connoisseurs or they want to be adjacent to connoisseurs you don't think band camp is that because it was sort of like oh i'm an indie kid i'm into band camp like it was like i tweet that i bought this on band camp friday like that's sort of an identity yeah but that's an identity of a music consumer in my opinion.

47:23Like I don't think Bandcamp is pulling in a non-music consumer or a lay person, right? Like that's the difference between Prada and A24 and like Bandcamp. Bandcamp is very much for music heads, right? And it doesn't do a good job of pulling in people who are not music heads and making them feel like they're music heads or pulling in people who are not music heads and making them feel like they have the status value associated with a music head. Does that make sense yeah and also that's kind of the problem with streaming to begin with is i think that it kind of made music lose its association with status or like a hundred percent that's exactly right people stopped like really defining themselves based on what they even listened to because it kind of just like leveled all music into like one blob that's exactly right the financial value in most cultural industries is very correlated with the status value and creating quantity of consumption based platforms flattened the status value of music right it also stripped music of its context as you've been saying this i've been wondering i'm like why is it so hard for music to do this when like you said all these other cultural industries have kind of been able to get it right like what are the variables here that have maybe put music at a disadvantage the answer is status in my opinion right like music has ignored the status value of music in a way that fashion is very acutely aware of the status value of fashion.

48:46And to some degree, like folks in indie film are much more cognizant from a financial perspective of the status value of film and television, right? I think there was this beautiful egalitarian notion of every song being equal, right? On platforms like Spotify and on the internet in general, but that's just not reflective of reality, right? And I'm not saying that big artists are better than small artists. I'm not saying any one artist is better than another artist. What I'm saying is that like not all songs are equal to the end consumer, right? Like some people care a lot about a thing and they don't care as much about another thing, right?

49:22And I think you need models that understand that and have a point of view that this set of music has value and has status value and this set of music does not. And that is what context is, by the way. Like the narrative is just an accrual of status value, right? Like telling the story matters so that you can tell the story to somebody else so that you can separate out why this song is good and this song is not, right? Like that's really the importance of context is the blurb at the museum next to the painting allows the curator to say why this painting is important. And what important means is that it just has value, right?

49:58So I think that's what music is missing. It's missing those kinds of institutions. Especially at a time when we don't have like the cover of the fader like print bingo bingo we had other things that helped kind of reinforce that in the past and those things have unfortunately uh disintegrated to some extent totally and it's why vinyl sales have like picked back up to some degree right it's why as the digital music industry declined over the past 15 or 20 years or so live rose to capture the value. Like if you look at from 1999, which was the peak of the music industry before piracy started to eat into the economic value of recorded music, from there, the music industry declined for like 15 years, but live actually went up, right?

50:45And the reason why is because there was status value of going to a show, right? You go to a show, you can put it on your Instagram story, and it allows you to broadcast to other people what kind of person you are, one, and two, that you're such that kind of a person that you were willing to put up the time and money to go to the show exactly it created community it created kind of like a cultural locus for essentially the product right um if we're going to be reductive whereas recorded music it's now like it used to be like context greater than content and now that's become completely inverted yeah i think that's exactly right i would argue that music is about three or four things in terms of its value and i mean that both from a psychological perspective as well as a financial perspective because I think those two things are intrinsically linked.

51:30But I would say music is about community, right? You go to a show, and we're using live as an example because I think it's done a much better job of capturing the financial value. You go to a show in part to be around people who care about what you care about, right? There's a lot of conversation sometimes about music being like the new church. And that's what that is, right? It's community. You can find a group of people that you don't know in other parts of your life where you have shared values. And that's really important, right, to give your life meaning. The second thing that's really important and related, but not necessarily the same, is its vehicle as a tool for identity, right?

52:06Even if you don't talk to anybody at the show, and even if you don't feel a sense of solidarity or camaraderie with people at a show, you feel like you're being your most fully actualized, idiosyncratic, unique version of yourself by going to a show. You feel like you're living your best life, right? You're not living some generic NPC life. And that's identity, right? You're being you. you're intrinsic you right and you're you're differentiating yourself from other people in that sense and that you're doing what is most aligned with you and so that's the second value of music the third also related but not the same is a sense of of of status right like we were saying you don't just go to a show to be surrounded by people who care about what you care about but you also want to put that on your instagram story right you also buy the merch so you can wear it out in public, right?

52:56And so it's not just about the inner feeling of identity, but it's also the external broadcast of identity. And that's status. The last psychological value that amplifies the other three is a sense of scarcity, right? You go to a show, not just because you're surrounded by people who care about what you care about, not just because it allows you to feel internally like you're being your most idiosyncratic self, and not just because it allows you to broadcast externally what kind of person you are, but also because your favorite artist might not come to town for another three years and you feel like you kind of have to go right or that piece of merch not everyone is going to have that piece of merch it's finite right there is a limited number of prints of that merch and you can only buy it at the show and there's a sense of scarcity right and so i would argue that spotify stripped out all four of those values from music streaming and from digital music and as such that's why it's very hard for them to capture economic value

54:12What do you think the recorded music landscape of the next five years is going to look like? Like, how do you see the streaming landscape evolving? what other models or conceptions of music as a commodity do you think we're going to see people experiment with? Yeah, well, I hope the models are less about music as a commodity and more about music as a scarce, valuable piece of art. I think in general, music streaming is going to move in the direction of video streaming. And what that means is that different pieces of content, different songs. I kind of hate the word content, but I'm just going to use it for the sake of this conversation.

54:52Different songs, different albums are going to be on different services, right? And those services will pay upfront amounts of money to have the exclusive rights to those songs and albums, right? I think that it's a win-win for everybody in that these services can use those songs and albums as a point of differentiation to say, hey, we have songs that other people don't have, you should sign up. It also allows them maybe to not have to compete on volume, right? Where if they can compete on differentiation, they can say, we have these songs that other people don't have, instead of saying, hey, we have 70 million songs.

55:28Well, we bet you'll find something that you like here, right? And if you look at China, by the way, that's the way that music streaming works or worked in China, where big music streaming services bought the exclusive rights to albums and songs. And then what they ended up doing was actually sub-licensing them to their competitors, which is very interesting. And that model was so effective. And I'm happy to send through show notes or anything like that, put articles about that. That model was so effective that the Chinese government had to step in in fear of that being overly monopolistic behavior and antitrust.

56:04So I think there's a model for that that works that is very closely aligned with the video streaming services today, right? Like if you want to watch Squid Game, you have to have Netflix. If you want to watch Curb, you have to have HBO. And what it allows those services to do is switch the cost from being variable to fix. They're paying one amount of money for those shows. And what it also allows them to do is not feel like they have to have every show. They just have to have quality programming, right? And so I think Spotify, Another metaphor that I use in addition to the H &M of music is that I very much think it's like the basic cable of music, right?

56:41The traditional basic cable package. I think it's like basic cable in three main ways. The first is that the content is commodified, right? So no matter who your basic cable provider is, Optimum, Time Warner, Comcast, whatever the case may be, they all have the same channels in their basic cable package. So that's the first way that I think Spotify is like basic cable on that. No matter who you, your major DSP that you use, whether that's Apple Music, Spotify, Deezer, Tidal, YouTube Music, it's all the exact same song, right? And so that's the first way that I think it's like cable. The second is that it's increasingly catering to lean back consumer.

57:19Ah, the lean back, yes. Right? Cable news is super repetitive. And my mom loves to talk about how repetitive cable news is, for example, but she doesn't necessarily talk about why that is. And the reason why is because they know you're not paying attention, right? So you have cable on when you're on the elliptical at the gym. You have cable on while you're cooking. You have cable on while you're doing the dishes. And so they have to say the same thing more than once because they know you're not leaning in with rapt attention. And I think Spotify is increasingly designed to be like that in music and designed to soundtrack moments in your life where music is secondary.

57:51So that's the second way that I think it's like cable. And then the third way that I think it's like cable is that if you look at the history of cable, originally cable was the same three channels that everybody got over the airwaves. Cable was CBS, ABC, NBC, but it was delivering those channels to people in places outside of the range of the airwaves, right? So cable was designed to deliver television to Boulder, Colorado, where the mountains got in the way, or it was designed to deliver television to Marfa, Texas, which was super far out from any antenna, right? Right. And what they eventually realized is that they could fit more bandwidth, more than three channels into the spectrum that they were laying down.

58:29And so they started to create new cable channels to broaden the audience. Right. Not just people who are in very rural, remote places, but to get people in New York and L.A. who already had CBS, ABC and NBC to pay for cable. Right. But the way that they created these channels was kind of hilarious. They were saying things like people like sports. What if we give them sports 24-7? and that's ESPN. People like news, what if we give them news 24-7 and that's CNN? There are black people. What if we made cable for them? And that's BET. And the most egregious example is if you look at Lifetime's first slogan, it was just cable for women.

59:07Yeah, it's very Warholian. Totally, 100%. It's very much in the Warhol universe of mass media. But I would also argue that Spotify kind of talks down its audience in a very similar way in terms of how it organizes owned and operated playlists. So all owned and operated playlists minus one that I helped work on that became the blueprint for some others, they fall into one of three categories. They're either moment-based, right? Songs for the car, songs for the shower, songs to work out to, or they're mood-based, happy songs, sad songs, rage, songs to cure your anxiety, or they're genre-based, Rap Caviar, Viva Latino, Hot Country, Today's Top Hits, Pop Rising.

59:50And I just don't think any of those ways of listening to music is reflective of the way that people who really care about music listen to music. So I think if you agree with me that Spotify is like the basic cable of music because it's increasingly catering to lean back consumer because the content is commodified and the audience segmentation is kind of outdated. I think the next phase of music streaming will look much more like HBO, which is differentiated content, a lean forward experience, right? HBO stands for home box office in part because the content on HBO was designed to be as compelling as like going to the movies, right?

1:00:30And it's lean forward content, right? Where you're on the edge of your seat. So yeah, I think the next wave of music streaming will look much more like that. There's this famous saying from Jim Barksdale, who I think was the president of Netflix, that every business is either unbundling or rebundling. And I think music streaming is very much due for an unbundling, right? That takes the business model of music streaming, which is actually proven to be quite effective, which is subscription, right? Spotify has proven that you can get 230 million people to pay some subscription for music. And that number is actually only even bigger as Spotify expands into other markets like India and Japan, where there's still pretty low penetration for them specifically.

1:01:09So, and there's a Goldman Sachs study that estimates that 1.2 billion people are going to be paying for music streaming by the end of 2030. So I think Spotify has proven out that subscription is actually a really effective business model, which is also where I think Bandcamp maybe could have learned from Spotify and other services. I think there's a mix of Spotify and Bandcamp, which takes the subscription business model and the ease of consumption from streaming and then takes the focus on independent artists from Bandcamp and the focus on the connoisseur from Bandcamp. And that's what I think the future of music looks like.

1:01:42Right. Almost like how, again, in fashion, you've seen a little bit of a pushback against fast fashion now happening and this return to kind of like a curatorial, like kind of more like ethical approach to fashion because of the scarcity factor, because a lot of these different things that you've mentioned before. Totally. I think that's right. I think music has a really interesting moment for an essence, right? You know Essence, the fashion retailer. I don't think Essence is perfect. And a lot of smaller retailers and smaller boutiques complain about Essence. But I think what they've done is a really good job of orienting a young consumer on emerging and independent designers and paying those emerging and independent designers a lot of money up front, in my opinion, sometimes, right?

1:02:29And what Essence does really well is they've created their own high-level brand that they can then slot new independent and emerging designers into where they have a built-in audience already, right? And I think that's what HBO has done really well, right? Like HBO, it doesn't really matter if you've ever heard of the creator of a show, you will probably check it out because it's HBO, right? And it's at a certain level of quality. And that actually benefits everyone. That benefits the show creator, the show writer, because they can slot into the existing ecosystem. And it also benefits HBO in that they have a little bit more leverage over the things that they have on their platform because they don't need any one show as much because they've crafted such a strong brand.

1:03:10So I think that's what the future of music streaming looks like for pure play music streaming services. I think volume-based music streaming services will still exist, but they will exist to sell other products. My prediction, and I don't know what the time horizon is for this, but I think over the long arc, Spotify will eventually shrink in market cap because they will not be able to turn a consistent profit. Or if they do, it will be razor thin and not really in keeping with investors' expectations. And then somebody will buy them. right and whoever buys them will use the volume-based music platform and the music platform with 220 million subscribers to sell those subscribers something else so i think the music streaming market is going to kind of bifurcate it will be the loss leaders in volume-based platforms and then it will be the curatorial boutique independent artists and like aspirational pure play services.

1:04:09And that's where I think Marine Snow, that's my goal for where Marine Snow sits. Yeah, this return of the sort of like the boutique option feels very in keeping with the conversation we had on our last episode with Ruby Justice Tello about, he called it the balkanization of the internet and kind of this return to the smaller, more niche communities and platforms. But yeah, could you tell us a little bit more about Marine Snow and how you first conceived it and how it differs from the platforms that we're already familiar with? Yeah. So, and just to build on what you, I think Ruby's super smart.

1:04:49He is. I think what's powerful about a niche music platform is that it actually doesn't have to be niche, right? The power of technology is that it can unite a bunch of people who care about a niche thing into like a potentially quite big audience. Right. And so that's where I think the promise of technology exists. I think a lot about Marine Snow in the context of if I was interested in indie music, niche music, and I lived in Malaysia, none of the artists that I care about, like if I'm into Bar Italia, we'll just use them as an example. If I'm into Bar Italia, Bar Italia are almost never coming to Malaysia, right?

1:05:28And in addition to them not coming to Asia, if I'm into Bar Italia, I don't know anybody else maybe who's into Bar Italia if I'm in Malaysia, right? And that's the power of technology is to unite all of those people across geographic differences, right? And so I think if you were to roll up the amount of people who care about music, it's actually like a pretty big audience. I would argue that in the second city of every major city, right? Whether that's East LA or Brooklyn in New York, there's a hipster contingent, right? And to some degree, there are a lot of global hipsters, right? And those are the people that I think actually spend the most money in cultural industries.

1:06:07And so that's who I think products need to be built for in technology. And I think it's a much bigger audience than people understand. And then the other thing I will say to that end is that I think paradoxically, the more niche you build a product is the more it appeals to people outside of that niche, right? Like I use outdoors brands a lot as examples, whether you're looking at Patagonia, North Face, Arcteryx, or Solomon, all of those brands are really built for outdoors people and hikers specifically, right? But paradoxically, they appeal to a bunch of people in cities who are not hikers because they want to look like they're hikers or they want to look like they hang out with hikers.

1:06:50Supreme is also the same way when it comes to skateboarding. Supreme is through and through a skateboarding brand, but they appeal to people who don't skateboard because there's cultural capital being associated with skateboarders and people either want to look like they skateboard themselves or want to be adjacent to skateboarders. And that's also the power of like a niche is that I think starting with a niche is the only way you build a really culturally resonant, financially lucrative business in the cultural industry, right? Because the more niche the brand is or the brand positioning is of something is the more it appeals to somebody who's not in the niche who wants to look like they're in the niche.

1:07:24Whereas if you stand for nothing, then you will never appeal to anyone, in my opinion. And it broadens the total addressable market, right? The addressable market for Solomon, for example, it's not just hikers anymore, right? It's people who want to look like they're hikers, which is a lot of people because of the interesting tension between people in cities wanting to look like they have tastes outside of those cities, right? And that's why outdoors brands do so well is because we're all locked in these cities and we all want to show that we have lives that are greater than the cities that we're in to some degree.

1:07:58Totally. So yeah, that's really, I think all of the things I've been saying dovetail nicely into Marine Snow and that Marine Snow is designed to be that HBO that I was describing. It's designed hopefully to be that A24 that I was describing. It's designed to be the essence, which I, again, I know is not perfect. I know when I use essence as a metaphor, people in fashion love to deconstruct that and critique it. I'm definitely aware of Essence's imperfections, but they've done a specific thing very well that has led to specific independent designers achieving a lot of success and building a really powerful, lucrative business, right?

1:08:34Like Essence is not just Prada, Gucci, Louis Vuitton, Givenchy, et cetera, et cetera. It's all of these independent designers, right? And Essence focuses somebody's attention who doesn't know that much about fashion on independent designers that they may not otherwise pay attention to. Right. And that's actually both a really valuable thing. And actually, I think a good thing for society. So yeah, that's Marine Snow in a nutshell. It's a streaming platform that signs artists to the point about vertical integration that we were talking about at the beginning of our conversation. We sign individual songs from artists that we think are historically, critically or culturally important.

1:09:11We're essentially taking a bet on those artists and those songs in particular, I think what that also allows us to do is be hyper curatorial in an era of digital overabundance, right? Like sometimes you open Spotify, you don't even really know where to begin, right? Whereas every single song of Marine Snow, you know, has been intentionally placed there by somebody who's made a bet on that song and that artist, right? So yeah, and it's designed to segment out the top five, 10, 20 % of people that we were talking about from the platforms that are built for mass consumption that are designed to be the H &M.

1:09:46I think you can even use LVMH to some degree as a metaphor if Spotify is like H &M, but I actually think Essence is even better. Tony, you'll know this better than I will, but there's this marketing theory of like, somebody has to be like exposed to a competitor option for something like, I don't know, seven times or something like that before they make the switch over. So with all of the, you know, sort of benefits and factors and value definitions that we've been discussing, ultimately people are inclined to just stay on the thing that they're already on. For sure. What do you think it'll take to compel people to switch over from the Spotify's of the world to these alternatives?

1:10:28I.e., how do we wean people off of the algorithm? Status. I think that's... Have you both read Status and Culture? I'm sure you've at least heard Bingo, exactly. I have not, but I read an article of his last night and I really want to read it. I think that's one of the best things I've ever read in my life. I think it really explains the interlinking of status and culture. And I think if you want to move people over to a new platform in a cultural industry, that platform has to be imbued with status so that people feel higher status if they're on that platform. It's really that simple, right? If you feel like you have superior taste or superior knowledge of fashion, Let's use Loire as an example.

1:11:14If you feel like you know more than people around you about fashion, if you have a Loire bag, you'll probably buy a Loire bag. And if you think the people who really know will respect you if you have a Loire bag, you'll probably buy a Loire bag. So I think that's the answer. You can't just expect people to switch over to another platform because of ethics. I just don't think that really works. If you say this is a much fairer system, an end consumer is going to say, well, what's in it for me? Unless they can project that they're, you know, they're consuming the fairer system and that's part of their value system.

1:11:48Bingo. And, but actually I would, I would actually argue that matters to some degree, but that, I think that doesn't matter enough to move the needle. I think even the fairer ethical example, it only matters if there's status associated with that, right? Like if you can signal to somebody that you eating chocolate or having a fair trade diamond in your engagement ring makes you a better person, a superior person, you will probably do it, right? In a way that somebody sees you ordering DoorDash or doesn't see you, sorry, ordering DoorDash all the time, right? Then you probably won't change your decisions, even if you know that ordering DoorDash is not good for the environment either, right?

1:12:30You are much more likely to wear the fair trade diamond than you are to curb your private consumption because there's no status value associated with that for sure and might it also be not about like oh i'm switching from this thing to this thing but that the future will be more about oh i am subscribed to the hbo and i subscribe to the hulu and i subscribe to this depending on what i want in a given time like we're going to become more familiar with like dipping in and out of like different communities, just like we might dip in and out of like different discord groups or something. I think that's right.

1:13:07I will argue though that that's not necessarily aligned with notions of identity, which tend to be a little bit more fixed. Not completely. You're right that I think in the digital internet era, our notions of identity are more dynamic than ever. I do agree with you, by the way, that music streaming will mirror video streaming that people will have more than one subscription. What I maybe will push back on a little bit is that I don't think people will cancel a subscription if it allows them to have high status right it's really that simple in the same way that like we'll just use Raya as an example I think music streaming looks a little bit like Raya not completely but a little bit like Raya and that I know I was just talking to a friend of mine who doesn't even use Raya anymore but she still pays the membership so that she can say she has Raya and so she can let other people know that she's somebody worthy of being on Raya.

1:13:56Wow. Wow. The digital semiotics of it all. Bingo. A hundred percent. A hundred percent. Like it's all about the sign and the signification of Raya. Right. And I just, I think that may seem a little bit dystopian to a certain person and a little bit elitist to a certain person. But one, I think it's just about directing that beam of energy to the right places. And two, that's just the way humans are. Right. Like we just crave status. We all want to feel meaning in a life that can sometimes feel meaningless, where we're cosmic specs in like a universe much greater than ourselves, right? And a way that a lot of us derive meaning is within our environments, feeling like we have some sort of sense of superiority than other people in that environment.

1:14:43And that's not the best thing, but it is a function of being human. And I think if you just focus that much more on that status value being associated with emerging independent artists, it actually can be a good thing for the world. Or it's like, I'm this kind of person, not that kind of person. And I want to associate myself with something where I'm, you know, if not directly meeting other people like me, I'm sort of showing the world, this is who I am, so that other people can see that. It doesn't have to be like status, like, oh i'm like in this like elite rich like right wealthy affluent community all the time it could be other values that determine the status right yeah i use status very similar it's not the same but it's overlapping with identity yeah right or i was gonna say like inclusivity like it's not status and kind of like the symbolic violence like sociological sense of the word but really more like being a part of something it's sort of interchangeable with community with being yeah with being inclusive, like being like, I get this too.

1:15:42And finding meaning in your life. Yes. Right. I think that's the future of music and music streaming that benefits the independent artists making boundary pushing and avant-garde music that I care about the most, right? It's like Bjork charging$350 to start for her ticket price because there's a certain level of craft and artfulness associated with Bjork's music. And it's reflecting that in the digital sphere. Yeah. Give music meaning again. Make music have meaning again. Bingo. And make music less like a commodity and more like a high art, which it is, in my opinion. Absolutely. Wow. Well, Tony Lashley, thank you so much for your time.

1:16:31This has been a really illuminating discussion. Thank you for having me. This was great.

1:16:48This episode of The Culture Journalist was produced by Emily Friedlander and me, Andrea Dominick, with editing by Ben Newman. Our theme music is by Mark Donica. To learn more about Marine Snow and check out a very cool shortlist of supplemental reading that Tony has provided for us, head to our sub-stack. That's theculturejournalist.substack.com And if you like what you're hearing Give us a share with friends Or leave us a rating or review on Apple Podcasts To help support independent journalism