Spotify, DistroKid and the Two Sided Marketplace

distrokid spotify

Spotify has taken a minority stake in DistroKid. In itself, it may be a slightly left field but relatively insignificant move, except that it is in fact one small but important step on a much bigger journey. Back in September, Spotify announced that it was enabling artists to upload their music directly to Spotify, simultaneously aggravating record labels, distributors, DIY platforms and Soundcloud all in one fell swoop. This raised an intriguing possibility of a ‘coalition of the willing’ forming against Spotify from slighted partners and competitors. But that’s another blog post. Right now, though, DistroKid’s role in this performance is as an enabler for Spotify in its path to becoming a next generation label / creating a two-sided marketplace (delete as appropriate depending on how all this affects your business).

Bringing efficiencies into the supply chain

Spotify’s DistroKid deal will enable Spotify’s direct artists to “seamlessly distribute their music to other platforms through DistroKid”.So, instead of putting all their streaming eggs in one basket, Spotify’s direct artists now get to stream their music on Apple, Amazon, Deezer and the rest too. What wasn’t made clear in the announcement is whether Spotify will have visibility of the streaming data from those other platforms and / or whether the revenue will be recognised as Spotify revenue and then distributed to its artists. If these statements were to be the case, then Spotify’s competitors would be feeding it data and revenue…

UPDATE: A Spotify spokesperson clarified that “Spotify has no rights to see data from other digital service providers and DistroKid will not share confidential information.”

Why this relatively small announcement matters, is that it is another piece of Spotify’s strategy of shifting its way up the value chain by a) removing some of the distribution component and b) entering into direct relationships with artists. It’s what west coast tech firms call ‘bring efficiencies into the supply chain’. If it all works, Spotify will get more margin, artists will get more margin, but middle players (labels, distributors etc.) will get squeezed.

Treading a subtler path

This is how Spotify can edge quietly towards becoming a record label without going nuclear from the get go. It is a strategy we predicted by in April ahead of Spotify’s DPO:

“As much as the whole world appears to be saying Spotify needs to do a Netflix (and it probably does) it just can’t, not yet at least. In TV, rights are so fragmented that Netflix can have Disney and Fox pull their content and it’d still be a fast growing business. If UMG pulled its content from Spotify, the latter would be dead in the water. So, Spotify will take a subtler path to ‘doing a Netflix’, first by ‘doing a Soundcloud’ i.e. becoming a direct platform for artists and then switching on monetisation etc.”.

The challenge for Spotify is whether it can execute on the strategy quickly enough to excite investors (and thus drive up the share price), but slowly enough to keep record labels on board…so that when they realise where things are heading then it is too late for them to do anything about it.

 

25 thoughts on “Spotify, DistroKid and the Two Sided Marketplace

  1. Pingback: Issue 526: The Mixcloud Takeover; Music Modernization Act’s Next Challenge; Spotify Updates App – Platform & Stream

  2. Pingback: Spotify ‘doing a Netflix’: is Daniel Ek’s platform already too big for the labels to stop it? | Hynana

  3. Pingback: Spotify ‘doing a Netflix’: is Daniel Ek’s platform already too big for the labels to stop it? – Business Bistro

  4. Pingback: Spotify ‘doing a Netflix’: is Daniel Ek’s platform already too big for the labels to stop it? – News Circles

  5. Pingback: Spotify ‘doing a Netflix’: is Daniel Ek’s platform already too big for the labels to stop it? – Lending Resolution

  6. Pingback: Spotify ‘doing a Netflix’: is Daniel Ek’s platform already too big for the labels to stop it? – Easy Instant Wealth

  7. Pingback: Spotify ‘doing a Netflix’: is Daniel Ek’s platform already too big for the labels to stop it? – Internet Marketing News

  8. Pingback: Spotify's Acquisition of Gimlet & Anchor Does to Podcasts What It Can't Afford to Do to Music - HOMEPAGE

  9. Pingback: Spotify ‘doing a Netflix’: is Daniel Ek’s platform already too big for the labels to stop it? – Reddy4bizru

  10. Pingback: My Blog » Spotify ‘doing a Netflix’: is Daniel Ek’s platform already too big for the labels to stop it?

  11. Pingback: Spotify ‘doing a Netflix’: is Daniel Ek’s platform already too big for the labels to stop it? – Business News

  12. Pingback: Spotify ‘doing a Netflix’: is Daniel Ek’s platform already too big for the labels to stop it? – big top news

  13. Pingback: Spotify ‘doing a Netflix’: is Daniel Ek’s platform already too big for the labels to stop it? – CVR News Direct

  14. Pingback: Spotify ‘doing a Netflix’: is Daniel Ek’s platform already too big for the labels to stop it? – US Daily News

  15. Pingback: Spotify ‘doing a Netflix’: is Daniel Ek’s platform already too big for the labels to stop it? – AllTheNews

  16. Pingback: Spotify ‘doing a Netflix’: is Daniel Ek’s platform already too big for the labels to stop it? – Yyour travel world

  17. Pingback: Spotify ‘doing a Netflix’: is Daniel Ek’s platform already too big for the labels to stop it? – Great travel world

  18. Pingback: Spotify ‘doing a Netflix’: is Daniel Ek’s platform already too big for the labels to stop it? – Travel for world

  19. Pingback: Spotify ‘doing a Netflix’: is Daniel Ek’s platform already too big for the labels to stop it? – personal finance online

  20. Pingback: Spotify ‘doing a Netflix’: is Daniel Ek’s platform already too big for the labels to stop it? – your personal finance

  21. Pingback: Spotify ‘doing a Netflix’: is Daniel Ek’s platform already too big for the labels to stop it? – personal credit society

  22. Pingback: Spotify ‘doing a Netflix’: is Daniel Ek’s platform already too big for the labels to stop it? – Accelerated Profit

  23. Pingback: Spotify ‘doing a Netflix’: is Daniel Ek’s platform already too big for the labels to stop it? – Entertainment Gab

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