University of Amsterdam

Department of Media Studies

Master New Media and Digital Culture

Spotify as a Multi-Sided Market An analysis of the evolution of Spotify’s platform

MA Thesis 2015-2016 New Media and Digital Culture

Date: June 24, 2016 Supervisor: dr. A. Helmond Second reader: dr. E. Weltevrede Table of Contents 1. Introduction ...... 2 1.1 Digital Music ...... 3 1.2 Cloud Music Services ...... 4

2. Music as a Service ...... 6 2.1 Media Ecology and New Materialism ...... 6 2.2 Digital Music, New Materialism and Music Streaming ...... 8

3. Platform Studies ...... 14 3.1 Conceptualisation, Origins and Critique ...... 14 3.2 How Could Platforms Be Studied? ...... 17 3.2.1 Historical Engagement With Platforms ...... 17 3.2.2 Platforms As Multi-Sided Markets ...... 19 3.2.3 Software Studies Perspectives ...... 23

4. Method ...... 28

5. The Evolution of Spotify’s Platform ...... 30 5.1 Spotify as a Multi-Sided Market ...... 30 5.1.1 The Entry Phase ...... 30 5.1.2 Expanding Strategies and Growth of Stakeholder Groups ...... 37 5.1.3 Demands of Content Providers and Tier Restrictions ...... 43 5.1.4 The Politics of Spotify’s Platform ...... 45 5.2 Affordances of Stakeholder Groups ...... 48 5.2.1 Users ...... 48 5.2.2 Developers ...... 50

Conclusion ...... 54

Bibliography ...... 56

1 1. Introduction Being a music lover, I discovered different ways to collect and listen to music. In my early years, I used the vinyl records from my parents, which resulted in my love for music. I had bought cassette tapes before I found ways to record them myself, I had bought CD’s before I found ways to burn them myself, and eventually I found ways to download music, though illegally, which helped to develop my present broad taste of music. Being a computer literate, the fact that all the music was available for me for free allowed for a deep dive in music discovery. I used illegal file-sharing services in order to cope with my demands until 2009, when I came across Spotify’s music-streaming service. Despite many songs that were not available yet on the platform, it provided an easy way to listen to music. And there was basically no need anymore to download music illegally, while it did fill the (little) amount of storage capacity on my hard drives. Thus Spotify got me on board and it reduced (yet not ended) my illegal downloading activity and for the first time in years, I found a way to listen to music legally again. It made me wondering how Spotify had done this. And I surely was not the only one that “fell” for Spotify. Spotify’s platform completely changed the music industry in order to deal with the threats of music piracy (Cox) and in this thesis I will try to explain how Spotify made this possible and why it is still there. While many paper have been written in the field of platform studies, these texts are rarely referenced in the emerging field of music streaming platforms. By using the different methodological approaches used in the analysis of platforms, I will give a basic framework for the description, analysis and positioning of this new sort of platform, the music-engineering platforms. I will base my analysis upon the business model of the multi-sided market that I will use as an analytical framework, and explain how the technical and expanding evolution of Spotify’s platform illustrates how this platform was able to rise and sustain in our contemporary society and to cope with the demands of their distinct groups of stakeholders. I will use the following research question, which will guide me through my research progress: How does the evolution of Spotify’s platform over time relate to the way Spotify orchestrates its relationships with its most important stakeholders?

2 In the rest of this introduction I will reflect on the way digital music and cloud music services have affected the music industry. Chapter 2 will give a reflection on the way music-streaming services were likely to arise in our contemporary society, especially from a media-ecological perspective. In chapter 3 the different approaches within the field of platform studies will be described and discussed. Chapter 4 will indicate how these approaches can be combined and operationalized as basis for my research. Chapter 5 will give my analysis of Spotify’s platform development over time leading in to answering the research question put forward. Finally, a conclusion will be given resulting from my research on the rise of Spotify, and how this can be understood in the general context of platform studies and other approaches I discuss in this thesis.

1.1 Digital Music The digitalisation of music has caused several problems for the music industry and it is struggling to stay in control on all fronts (Hesmondhalgh 57). When I speak of the music industry in this thesis my aim is to not only describe the recording industry which is many times mistaken to be the only group of companies within an homogeneous music industry, but also all organisations and individuals from other industries such as the live music and publishing industry (Williamson and Cloonan 314). The problem for the music industry was caused by the fact that digital music was easy to copy and circulate (Hesmondhalgh 59). Many platforms that supported unauthorized file sharing seized the opportunities this simple fact brought about. Hesmondhalgh describes four technological innovations, which were, according to him, responsible for the way digital music influenced our contemporary music industry. Firstly, the development of the MP3 format made it possible to compress audio files to make it suitable for computer storage. Secondly, the rise of high bandwidth connections, which made it possible for more and more people to download music online. The third innovation was the introduction of computers with increased storage capacity and possibilities to play music. And finally, the fourth innovation was the development of software that made it possible to convert audio files on CDs to the easily replicable MP3, and other formats

3 (Hesmondhalgh 59). All this created the fundamental base for illegal file sharing platforms to use peer-to-peer networks in order to make basically all music available for everyone for free. Obviously this was illegal and even to this day the music industry found itself in an on-going battle with unauthorised file sharing with a contemporary example such as Soulseek1. The digitalisation of music, although quite bad for the music industry, did create possibilities for music service companies to distribute music in a variety of ways. One early example is YouTube who created a streaming service to distribute music thereby bypassing legal concerns (Hesmondhalgh 63).

1.2 Cloud Music Services Another significant development within the digital world, which was also important for the existence of a music-streaming platform such as Spotify, was the shift from software to services. In the past, people usually bought software that they could install on their personal computers. Nowadays, it is very common to subscribe to a platform and install a service. In this way, software has increasingly become a service that can be rented and does not need to be purchased (Kaldrack and Leeker 9). This development is what Kaldrack and Leeker call the Software as a Service (SaaS) business (10). The use of these services is no longer restricted to personal computers since the hardware has become more diverse with the introduction of laptops, smartphones, and tablets. And for these different forms of hardware, a variety of services have been developed and brought to the market. This development was enabled to rise due to the four technological innovations concerning digital music that I described in the previous paragraph and the SaaS business provided possibilities for the management of the increasing amount of traffic these technological innovations created (Kaldrack and Leeker 14). The growth of the Software as a Service business goes hand in hand with a development coined as cloud computing. Cloud computing can be defined as “Internet-based computing, whereby shared resources, software, and information are provided to computers, and other devices on demand” (Kaur

1 http://www.slsknet.org/news/

4 373). Cloud services provide possibilities for large storage spaces which can be used for all types of data, for example music files, playlists, preferences, and other information which all can be accessed regardless the device of location (Morris n. pag.). The introduction and development of cloud services and their supporting technologies provided opportunities for music streaming services that were not there before. The technical concept of SaaS and the growing capacities of cloud services enabled making music available to many more people on every location they want to and at their desire and at a cost level that made illegal downloading less attractive or desired. Hence it created a new form of music consumption, a new way of listening: ‘ubiquitous music listening’ (Morris n. pag.). A specific type of service that gained traction was the so-called music streaming service. In the next chapter I will describe how a media-ecological perspective helps to further explain the existence of the relatively new phenomenon of music streaming services.

5 2. Music as a Service This thesis is organised around the way Spotify orchestrates its relationships with its most important stakeholders. Before I elaborate on the platform studies approaches and how these can reveal the specific way Spotify does this in the following chapters, it is necessary to explain how the development of the phenomenon of music streaming can be understood in the context of related aspects of our contemporary society. By investigating the way streaming- services were able to enter and sustain in our society, it becomes possible to explain in more depth how Spotify became attractive for their distinct group of stakeholders in the first place because it is a music-streaming service. Therefore, I will use this chapter in order to explain how music-streaming services can be seen from a media-ecological perspective with a focus on the concept of new materialism. In paragraph 2.1, I will describe the relative media-ecological perspectives and how these can be operationalized in order to explain in how music streaming has become a common phenomenon in our society in paragraph 2.2.

2.1 Media Ecology and New Materialism In the article “The intellectual roots of media ecology”, Casey Lum gives theoretical insights in what media ecology is. He describes media ecology initially as “the study of the interaction among various forms of media in the struggle for their own niche and survival in a complex ecology of social forces” (Lum 1). In the case of streaming services, the social forces of interest for my research in this chapter, consists of aspects that influence preferred modes of music listening in our society, such as the availability and accessibility of different music services in relation to the willingness to participate amongst music listeners and content providers on which I will elaborate later in this chapter. Many different scholars can be seen as influencing within the discipline of media ecology, such as Marshall McLuhan who has been known to study the relation between media and social change, and Neil Postman who is seen as the first that gave the media ecology paradigm a place within the field of media and communication studies (Lum 3). Also recently, various authors such as Michael Goddard provided a contribution on which I return in a while, what makes media

6 ecology a field of study with a theoretical perspective in development. According to Lum, the initial definition described above still gives a good perspective on what media ecology is, because it focuses on the most important aspect of media ecology, which is the complex relationship between media and the various forces in society (Lum 1). According to Postman, a medium is a technology, which affects the state of our contemporary culture, in a way that “it gives form to a culture’s politics, social organization, and habitual ways of thinking” (Postman 10). With this claim, Postman aims to say that media ecology is not only about an interest in the medium, but also about the ways in which interaction between a medium and people gives culture its character (Postman 11). In this way, Postman’s line of thought within the field of media ecology is connected with the concept of technological determinism. According to Dafoe (1049) technological determinism is about the assumption that technology drives societies social structure and cultural values (1049). But clearly technological determinism is more absolute in how technology influences how cultures and cultural values evolve over time than how Postman sees this. According to him there is an interaction between people and technology that leads to a kind of balance. It is less of a one-way street than the characteristics of technological determinism imply. Therefor, Goddard claims a critical reflection in this field was much needed. In his opinion this was achieved through the work of Matthew Fuller who claimed the study of media ecology lacked a focus on materialism, politics and complexity (Goddard 7). According to Fuller, we need to ask ourselves what the different material qualities of media are, and how their various rhythms, codes, politics, capacities, predispositions and drives can be interrelated to produce new patterns, potentials and dangers (Goddard 7). Goddard claims Fuller’s line of thinking is a crucial one, because its focus on the materiality, gives the academic field of media ecology a better connection with new media theory (Goddard 7). This is obviously also interesting for my research, since streaming services have a strong connection with the new material qualities of digital media and the possibilities for online music providers that were given by these developments. While Postman aims to emphasize the way how interaction between media and people gives culture its character, Fuller’s line of thinking is helpful to gain a more elaborated perspective within the study of the interaction

7 between media and people by focusing on the different material qualities of media. Fuller’s focus on the material qualities of media connects to the concept of new materialism, which is described by Jussi Parikka in the article “New Materialism as Media Theory”. According to Parikka, the notion of materialism does not necessarily need to be connected to tangible objects. The complexity of computing and networks made place for a new conceptualisation of materialism, called new materialism. The concept on new materialism focuses on the way perception, action, politics, and meanings are grounded not only in human, animal, and tangible objects, but also in ‘things’ and even non-solid things (Parikka 96). This also includes non-touchable object such as “modulations of electrical, magnetic, and light energies, in which also power is nowadays embedded” (Parikka 96). In this way, Parikka claims we need to look at materialism in a more flexible way by proposing a multiplicity of materialisms, which makes it possible to analyse contemporary culture by focussing on a variety of specific forms of materiality. This makes it possible to include non- solids and what he calls the ‘weird materiality’ of technical media, in order to understand how these new forms of materiality influence contemporary media culture (Parikka 99). I will use the concept of new materialism in order to answer on Fuller’s call who advocates media ecology needs to be more focused on material qualities of media. In this way, new materialism with its definition of extensions of types of materiality, including less tangible objects, enables me to analyse new media objects from a media ecological perspective what brings music streaming services into the picture and I will elaborate on that in the next paragraph.

2.2 Digital Music, New Materialism and Music Streaming A significant moment in the age of digital music was the development of the MP3 format. Around 1995, the format came into use and it became a standard for music on the internet quickly from the moment the necessary encoding and decoding tools were easily available (Tilson, Sørensen and Lyytinen 4629). The digitalization of music through the use of the MP3 format enabled sharing music on a larger scale than ever before. The format was (and still is) easily replicable

8 and it removed the physically constraints tapes, CDs, and LPs had. Also, the MP3 format introduced a very high compression rate, which made it possible to store large selection of music files on computers. As mentioned earlier these possibilities that became available to many led to a high rise of illegal downloading and music sharing (Tilson, Sørensen and Lyytinen 4632). Most importantly, it created a transition from physical to less tangible music formats; a more manageable electronic file replaced CDs and vinyl records. This created a new form of materiality different from old music carrier formats. The intangibility of the MP3 format is difficult to define. Feathermann and Wells describe that the definition of intangibility has three dimensions, namely ‘physical intangibility’ which means the object has no access to human senses, ‘general intangibility’ which refers to the way that consumers can not define the object concretely in term of features and usage outcomes, and ‘mental intangibility’ which refers to the inability of consumers to gain a clear picture of the object in question (2). This definition shows it can be troubling to apply it to digital music since digital music has some access to human senses (the ability to hear sound), also it is possible to define it in terms of features and usage, and in a way people can also get a picture of digital music since the format is many times accompanied with pictures of album covers and other relevant pictures. From a media ecological perspective, it is interesting to take notice of the way these new material capacities of the digital music format created both new threats as well as opportunities for streaming services. In the article “The Intangibility of Music in the Internet Age”, Styvén describes how providers of online music dealt with the intangible aspect of digital music and how these providers started to play a role in digital music consumption. Also, Styvén refers to the multiple levels of intangibility, which makes it hard to define digital music in terms of intangibility. According to Styvén, digital music as a market entity, can be partly tangible and partly intangible, but most importantly in the case of digital music is the fact that it changed a tangible aspect (physical CDs and LPs) into an intangible aspect, the MP3 format (55). The intangibility of online products became a central issue because it changed the way people listened to music. At the same time, people perceived digital music more as a service than a good, which resulted in a

9 difficulty of pricing (Styvén 54). The digitization of products led to an abstraction of the products, in the sense that people saw these products as less authentic and therefore less valuable than physical forms of the same products, such as CDs (Styvén 58). This was clearly a downside for music providers that embraced the opportunities the new format also had for them. The fact that people appreciated the digital format less than the physical forms was obviously an important factor for the battle between legal and illegal content providers, since most people perceived the intangible music format as an invaluable one as it was also available to download illegally for “free”. To this day, the new form of materiality of music carriers proved to be a challenge for online music providers selling musical content to consumers that would own and store it on their computers. The possibility to own and store music on computers seemed to be an important aspect of that challenge and music streaming services have found a way to adapt to the intangible nature of digital music and showed how a new form of materiality (the intangible format) could also create opportunities of how to deal with this differently. What makes music streaming a phenomenon is the fact that music streaming can be seen as a service. This is in contrast with the Download-to-Own (DtO) business model, which is aimed at customers paying for songs to acquire property rights. With music streaming people use a service, which is characterised by yet another form of materiality, because people don’t acquire any property rights for the music they listen to (Doerr et al. 14). And in fact, the only possibly tangible aspect of the MP3 format, the electronic files on computers, have gone completely with music streaming services because one does not have these MP3 files on their computer anymore when music is listened through streams. Also the payment method for streaming services is different to the method used by DtO platforms. DtO platforms use a Pay-per-Download (PpD) method while some streaming services offered the possibility to stream music for free or to pay a monthly fee in order to listen to all available music from the platform in question (Doerr et al. 15). A well-known example of such a streaming service is YouTube. YouTube as a free service showed people could listen to the music they want for free. In order to cope with copyright infringements, YouTube was obliged to make deals with record companies such as Universal

10 Music, Sony BMG, EMI and the Warner Music Group in 2006, what decided that the record companies received a fee per-stream and a part of YouTube’s advertisement revenue (Kim 56). Recently, YouTube also provided a paid service called YouTube Red, what enabled paying users to make use of extra features such as the ability to play uninterrupted streams (without advertisements) and to use the service offline (“YouTube Red”). In contrast to DtO platforms, users have to be online (connected to the internet) to listen to free music streaming services. To resolve that limitation, streaming platforms started to make arrangements for listening to music offline. As the example of YouTube streaming service illustrates, many streaming services introduced the so-called ‘freemium’ model, which is a term coined by Fred Wilson. In a ‘freemium model’ consumers can use the platform for free and listen to the offerings of music while being online (‘free-tier’), and only if they pay a monthly fee they gain access to premium features of that particular platform, including the possibility to create offline playlists (‘premium-tier’) (Wilson). In addition, as subscriber to such a premium account, one can make use of community features and most importantly, one does not longer receive advertisements (Doerr et al. 16). The constant stream of ads (advertisements) was an important proposition in the business model for music providers to make the music itself available for “free”. Another important aspect for the existence of music streaming services is the availability of suitable infrastructures, which are fundamental for the distribution of music streaming services through all suitable types of hardware, including smartphones. Mobile devices are a significant new form of infrastructures that influence music listening practices. The development of this type of materiality, the one of the underlying infrastructure needed to listen to music, is also key to the success of music streaming services. As argued by Beer, the rise of mobile music technology has changed everyday practices (Beer 469). The infrastructures that support mobile music are part of the broader patterns of connectivity and informational extraction, which in turn is a part of the shift towards the harvesting of transactional information about our daily practices on which I will return in chapter 5 (Beer 479). The mobile devices with increasingly powerful microprocessors and storage capacity and their supporting infrastructures constitute a form of materiality, which is fundamental for the

11 existence of what I like to call ‘ubiquitous music listening’. This term is a derivative of what Mark Weiser coined as ‘ubiquitous computing’ what means that computing technology vanishes into the background, and is seamlessly integrated in our world, and therefore appears everywhere, connected with our daily practices (Weiser 94). For streaming services, the most important development in relation to ubiquitous music listening is the growth of wireless data services, what in turn has the effect that wireless carriers upgraded their mobile wireless networks to provide faster data rates for smartphones (Yang 344). The 3G cellular network exists for a while now, and more recently, wireless carriers started to provide the 4G cellular network, which supports higher data rates up to 42 Mbps (Yang 344). The increasing availability of the mobile wireless networks is an important factor for the growth of mobile cloud computing (Yang 353), which in turn is an important factor for the development of ubiquitous music listening within our everyday practices on which I will elaborate further in chapter 5. From a media ecological perspective, the most important reason for the existence of streaming services is the sort of materiality digital music has evolved into, from vinyl records to CDs to MP3 files, to at this moment music as service with the intangible music format form as one can see it. Next to the fact, of course, the music providers were able to still make a viable business model out of it, while they enabled people to stream music for free. This came about for the consumers at the cost of having to bear with large amounts of advertisements of which, however, they could be protected from for a price for a paid subscription. The technical possibilities of music streaming with this new intangible digital music format proved to be a real threat for DtO platforms that use a PpD payment method, basically similar to the way people had always paid for physical music, but in this case for music one could not hold in your hands (like CDs) which made consumers less willing to pay. On DtO platforms, people pay for property rights to gain the possibility to own the music they buy and store it on their computers. Unauthorised file sharing also gave people the opportunity to store music on their computers for free, which became another, even bigger, threat for legal DtO platforms until this day. This also shows how the concept of materialism can be complex when applying it to digital music

12 since, in the case of DtO or illegal music downloading, people still have their music stored on their own computer, while the same format is being used as part of music streaming but in this model the consumer does not need to own it or have it on their computer or smart phone to listen to it. They can though, however, then they have to pay again for it. Music with property rights constitutes a specific form of materiality. Streaming services gave a new dimension to this material aspect. They decided to stop selling property rights and instead provided a service to listen to music instead of a tangible product that basically “carried” the music in it. In this way music streaming platforms showed how new material aspects of digital music created potentials and they started to rent out access to music.

13 3. Platform Studies As I regard Spotify as a platform it is necessary to pay attention to the different approaches within the field of platform studies and the way platforms are conceptualised. In the last decade various contributions have been made, which can be coined as platform studies approaches. Since the word ‘platform’ can be used for many different objects such as hardware platforms, software platforms, internet platforms and in the case of Spotify music-engineering platforms, there is much difference between the approaches various authors have been advocating in order to analyse platforms. Not all approaches are suitable for my research what I will indicate, and therefore an important part of my research also consist of deciding what approaches do enable me to analyse Spotify’s platform. In this chapter I will describe the important theoretical and conceptual contributions in the field of platform studies that are relevant for the analysis of Spotify’s platform. Next to this I will describe how I think these approaches can be used in order to analyse Spotify’s platform and in particular to elaborate on the way Spotify’s stakeholder relations are related to the technical evolution of the platform. In paragraph 3.1, I will explain how platforms can be seen from a theoretical perspective and how studies of platforms were introduced. In paragraph 3.2 I will further reflect on a range of approaches in order to understand and explain how these approaches enable me to study Spotify’s platform.

3.1 Conceptualisation, Origins and Critique As described above, the word ‘platform’ is connected to several connotations what makes it hard to conceptualize the ‘platform’ in singular way. Due to this fact, there are different approaches towards describing and explaining the concept of ‘platforms’. An important approach, which can be coined as a ‘platform politics’ perspective, comes from Gillespie who discusses the ‘platform’ as a theoretical concept in relation to internet platforms such a YouTube. According to Gillespie “‘platforms’ are ‘platforms’ not necessarily because they allow code to be written or run, but because they afford an opportunity to communicate, interact or sell” (351). Contemporary internet platforms face the same questions regarding their responsibilities as television networks did before

14 them, namely the questions of responsibilities towards their stakeholders (348). To address these responsibilities, platforms need to make use of different strategies, which aim to satisfy different stakeholders through different manners but with the same goal of attracting them and keeping them on board. To satisfy different stakeholders through different manners, the use of the term ‘platform’ seems to be an effective approach for content intermediaries such as YouTube. Gillespie claims, the use of this term becomes a “discursive resting point” (348) since there are benefits of making use of a term with different connotations. The broadly and discursive use of the term ‘platform’ reveals how many content intermediaries such as YouTube make it possible to present itself according to different principles to enact on their key constituencies (348). By using a successful example such as YouTube, Gillespie explains how they do that. Content intermediaries are often organised to present themselves strategically to three constituencies, namely users, advertisers, content providers and developers. This is what Gillespie means with the discursive use of the term, namely the fact that ‘being a platform’ enables these intermediaries to present themselves to those constituencies in different ways in order to become acceptable to each, and at the same time serve their own financial interests (353). Gillespie claims that the possible versatility of strategic approaches towards their key constituencies, establishes the satisfaction of the key criteria by which platforms are being judged (359). Since Spotify is also a content intermediary that has to enact on the demands of its distinct stakeholders, Gillespie’s focus on the way platforms communicate in various ways towards their stakeholders also becomes interesting while analysing a platform such as Spotify. Platform studies were introduced in 2007 by Nick Montfort and Ian Bogost, who claimed that new media studies that are organised around the study of computers and culture, needed a deeper focus on the way platforms enable computational expression (Montfort and Bogost 2007, 1). They also published the book Racing the Beam (2009). In this book their aim was to “promote the investigation of underlying computing systems and how they enable, constrain, shape, and support the creative work that is done on them” (Montfort and Bogost, 2009, vii). According to Montfort and Bogost, every study of platforms

15 needs to be technically oriented, because if we want to research how the experience of developers and users who make use of the platform in question, relates to creativity, design, expression and culture, we need a serious investigation of computing systems (2009, 3). They distinguish five levels “that characterize how the analysis of digital media has been focused – each of which, by itself, connects to contexts of culture in important ways” (Montfort and Bogost, 2009, 145). These levels, which are layered upon each other, are (Montfort and Bogost 2009, 146-7): - Reception/operation, which can be analysed through studies of media effects. - Interface, which can be analysed through interface studies and other approaches such as visual studies. - Form/function, which can be analysed with ludology/narratology studies. - Code, which can be analysed with code and software studies. - Platform, which is the understudied layer from which the analyses needs to be fulfilled by platform studies. Montfort and Bogost claim that a platform is the lowest level of the five, which is the most fundamental level and shapes the levels above (2009, 147). In this way they tried to explain the importance of the study of platforms, since the platform level influences all other levels. With their analysis they elaborated on how the material constraints of a particular hardware platform (in this case the VCS hardware of the Atari Video Computer) created possibilities instead of constraints for people that engaged with the platform (Montfort and Bogost 2009, 140). In this way they analysed a single platform “or a closely related family of platforms” (Montfort and Bogost 2009, vii-viii), in order to elaborate on it by investigating the material traits the platform embodies. While they base their analysis on particular sort of platform, which basically comes down to an analysis of hardware, they claim platforms can also be operating systems, programming languages or environments within operating systems (2009, 2). Dale Leorke claims that the Racing the Beam series produce a risk that might reduce platform studies in a standardised format that can be repeated on comparable platforms and, therefore, limits the approach rather than expands it

16 (258). According to Leorke, this is illustrated by the fact that the subsequent books in the series, which were released after Racing the Beam, apply the formula that was established by Montfort and Bogost by investigating the common material traits of a particular type of platform (260). While the platform studies series provided a framework for platform analyses, the specific method Montfort and Bogost were advocating to analyse platforms remained unclear. This is also described by Thomas Apperley and Jussi Parikka who claim that Montfort and Bogost did not contributed to a specific method for analysing platforms but rather just performed their analysis on the Atari Video Computer (2). Montfort and Bogost acknowledge this fact by calling out for contributions from all theoretical fields and research backgrounds to consider the platform topic more often and contribute to the understanding of platforms by doing studies which are centred around platform studies themselves (2009, 149-50). The approach that Montfort and Bogost are advocating is in my opinion too much based on the analysis of a particular type of hardware platforms, namely gaming consoles. Since ‘platforms’ nowadays embody a more varied range of objects such as Spotify’s platform, a platform that is difficult to compare with gaming consoles, I will focus on other approaches that I will describe in the next paragraph.

3.2 How Could Platforms Be Studied? In this paragraph I will reflect on the approaches that can be useful to study my object of study. By reflecting on the various approaches I will explain how I follow certain authors in their approaches and how the combination of these approaches allow me to answer my research question. Firstly, I will describe how a historical engagement with platform can be achieved, secondly, I will describe the economic perspectives that allow me to study stakeholder relations, and thirdly, I will elaborate on software studies perspective that will help to elaborate on technical aspects of Spotify’s evolution, and how these are connected to the orchestration of stakeholder relations.

3.2.1 Historical Engagement With Platforms Since my aim is to research how Spotify’s platform has evolved over time, is it necessary to develop a historical engagement with the platform. Therefore, I will

17 use this subparagraph in order to explain which approaches are taken into consideration for my historical analysis of Spotify’s platform. Various authors provided a contribution to the field of platform studies. One of them came from Anne Helmond. According to Helmond, the way to study platforms in a technically oriented manner (what Montfort and Bogost were advocating) can be achieved by analysing “a platform’s developer documentation, developer blog, company blog, privacy policy, terms of service or help documentation” (Helmond 2015a 18). By analysing these materials, Helmond was influenced by a software studies perspective from Kirschenbaum who advocates the method coined as ‘documentary analysis’. In the following quote, Kirschenbaum describes what his method consists of:

“Software is the product of white papers, engineering specs, marketing reports, conversations and collaborations, intuitive insights and professionalized expertise, venture capital (in other words, money), late nights (in other words, labor), Mountain Dew, and espresso. These are material circumstances that leave material traces - in corporate archives, in email folders, on whiteboards and legal pads, in countless iterations of alpha versions and beta versions and patches and upgrades, in focus groups and user communities, in expense accounts, in licensing agreements, in stock options and IPOs, in carpal tunnel surgeries, and in the [former] Bay Area real estate market (to name just a few)” (Kirschenbaum 149).

Kirschenbaum claims the analysis of all of these documents and other traces is a fruitful method to recover digital histories (153). Kirchenbaum’s method of recovering digital histories is useful for my analysis since the analysis of these materials will allow me to engage with the evolution of Spotify’s platform from the perspective of the platform itself. In the chapter 4 I will further explain why Spotify’s own perspective is useful to reflect on. Since the documentary analysis method is organised around the perspective of the platform owners themselves and therefore also restricted to their own perspective, it is necessary to reflect on other approaches. Another

18 approach to study platforms is advocated by Apperley and Parikka. They claim that the field of platform studies needs to be enriched by key themes within media archaeology (2). In their article, they focus on areas where the connection between media archaeology and platform studies could be interesting to bring new insights. The most important in relation to my research is the way in “which the archive can be used to reconstruct a platform“ (Apperley and Parikka 3). For Apperley and Parikka, the archives that can be used for platform research, can be called ‘paratexts’ (6). This term was coined by Mia Consalvo who described paratexts as the materials which “surround, shape, support, and provide context for texts” (Consalvo 182). They are actually texts about texts. Those paratexts consist of “delineated archives of developer interviews, end user responses, software and other material” such as journalism and marketing materials (Apperley and Parikka 6). In this way it is possible to reconstruct a platform and see how it evolved over time. To do this, researchers will need to make use of a large set of archives, which are available through publicly accessible paratexts (6). Since I need to make use of corpus materials that help me to explain how Spotify’s platform has evolved over time and there is not much written further about Spotify’s innovations, the paratexts which are available for me to conduct constitute an important part of my corpus materials on which I will base my analysis.

3.2.2 Platforms As Multi-Sided Markets In order to elaborate on Spotify’s distinct stakeholder relations I will make use of economic perspectives that study platforms as ‘multi-sided markets’. Jean- Charles Rochet and Jean Tirole approach platforms from such an economic perspective. They describe that most online markets such as platforms in software, portals, and media industries, bring together two or more parties (Rochet and Tirole 990). In this way they define multi-sided markets. Therefore, platform owners carefully need to employ strategies that successfully bring necessary parties on board (Rochet and Tirole 990). In many cases of multi-sided markets, platforms make profits out of some stakeholders, and have to take losses from other stakeholders (Rochet and Tirole 991). Another contribution

19 concerning approaches to analyse multi-sided markets came from David Evans. According to Evans, platforms are able to create a “social surplus” (191) when they meet three important conditions, namely: by bringing together distinct groups of stakeholders, by making sure distinct group members benefit from other group members by coordinating their connections carefully, and by creating business strategies, which are aimed to create indirect ‘network effects’ between the distinct groups in order to improve the business model of the multi- sided platform (191). These network effects can also be called network externalities. Network externalities are exhibited when “the value of membership to one user is positively affected when another user joins and enlarges the network” (Katz and Shapiro 94). The only way a multi-sided platform can exist is by getting different groups on board from the beginning. This is what Rochet and Tirole call the “chicken-and-egg problem” (990) since a particular group must already be on board before another group can be attracted to make use of the platform in question (990). Many times, platforms invest in one specific part of the spectrum of the market, for example by providing tools for developers or providing access to services for free in order to create positive effects on the network externalities amongst their stakeholders (Evans 195). When platforms passed the entry phase and became a multi-sided platform, the challenge remains to continue to exhibit the best network in order to increase the value of all involved groups of stakeholders (Evans 196). Annabelle Gawer summarizes the economic perspectives as approaches which position platforms as important infrastructures that create value by connecting at least two distinct groups of ‘consumers’ who would not have been connected if the platform did not exist (1241). The value of the platform for both the platform owners and the distinct groups of users is created by the coordination of those groups and effective price strategies which should effect in a large consumers base, which in turn should effect in a “virtuous circle of network effects” (Gawer 1241). Gawer acknowledges the importance of the economic perspectives described above, but claims these perspectives are built on certain assumptions, which limits them in a way. For example, most economic models approach platforms as ‘exogenous and fixed’ what leaves insights into platform evolution underdeveloped (Gawer 1241). Next to this, she claims the

20 relationship between the platforms and the groups of consumers is being approached as a simple seller-buyer relationship. This has the effect that the groups of consumers are threatened equally, whether they are end-users, developers, or content providers (Gawer 1241). According to Gawer, the limitations described above result in certain groups of important stakeholders, such as developers, being left unexamined. Next to this, the network externalities are often assumed as unchanging resulting in the conception that platforms are presumed unchanging (1241). In the case of technological platforms, the current state of a platform and the current relationship with stakeholders are interesting to analyse, but Gawer states we should also look at the way platforms evolve and innovate in order to sustain their relationships with their stakeholders (1241). Therefore, while analysing technological platforms as evolving and innovating markets, she claims it is necessary to complement the economic approaches with concepts from engineering design perspectives, in order to approach platforms also as technological architectures that enable innovation (Gawer 1242). Since Spotify is an example of a multi-sided market that brings distinct groups of stakeholders together, such as content providers, users, advertisers and developers, the economic perspectives described above are fruitful in order to elaborate on the connections between stakeholders and by identifying the way on which Spotify’s platform exhibits network externalities. Since this is an important way on which Spotify orchestrates its relationships with its stakeholders, I will base my analysis on these approaches in order to basically describe how Spotify as a multi-sided market created value amongst their stakeholders. However, as Gawer claims, the perspectives described above will not allow me to analyse how these stakeholder relations and network externalities have evolved and what motives Spotify had while coordinating the connections between its stakeholders over time. According to Anne Helmond, Bernard Rieder and Guillaume Sire have made an important contribution in order to answer on Gawer’s call to complement the economic approaches with perspectives that allow us to take platform innovation in account (2015b, 2). Rieder and Sire analysed Google’s search engine as a multi-sided market. They use a microeconomic approach to analyse Google’s search engine, which consists of an analysis of specific involved markets in order to research how the

21 necessary resources are allocated in a variety of ways based on the demands of all involved stakeholders (Rieder and Sire 199). With that microeconomic approach they aim to identify and analyse possible ‘conflicts of interest’. With conflicts of interest they mean aspects of platform innovation that are not necessarily motivated through choices of platform owners themselves but through demands of stakeholders influenced by tensions between the distinct groups of stakeholders (Rieder and Sire 199). These conflicts of interest can be revealed by elaborating on the complex situation wherein platforms need to choose which groups of end-users have to be served in particular ways to be as attractive as possible to other involved groups (Rieder and Sire 200). In order to get a grasp on the connection between the business model of the multi-sided market and the evolution and innovation of platforms, Rieder and Sire claim we should not only look at the current market configuration platforms are embedded in now but which cause and motives platforms had when they incited actions to evolve and innovate (203). As described above, sometimes stakeholders force platforms to evolve and innovate in specific ways but next to this, platforms mainly evolve and innovate in order to maximize profits (Rieder and Sire 203). According to Rieder and Sire, microeconomic reasoning can extend the analysis of a multi-sided market in order to research which motives play a role in the creating, shaping, and innovating of platform services (208). Spotify is a platform that has to cope with heavy demands of content providers who constitute a fundamental group of stakeholders for the existence of Spotify by making their music available. Therefore, the microeconomic approach Rieder and Sire are advocating will help me to elaborate deeper on the way the evolution of Spotify’s platform relates to the way Spotify orchestrates its relationships with its stakeholders. In this way, by using the approach of Rieder and Sire, it becomes possible to extend my analysis of Spotify as a multi-sided market by taking platform innovation in account. Next to this, the economic perspectives that approach platforms as multi- sided markets are connected to the way Gillespie discusses the platform as a theoretical concept. The variety of ways in which a platform needs to serve different involved stakeholders as a multi-sided market has a strong connection to what Gillespie describes as the politics of platforms, which are represented by

22 a variety of manners platforms have to use to serve different involved stakeholders to stay as attractive as possible to all groups concerned. Therefore, I will extend the analysis of Spotify as an evolving business in a multi-sided market by complementing it with an analysis of the way Spotify uses different communication strategies towards its stakeholders.

3.2.3 Software Studies Perspectives Next to my focus on Spotify as a multi-sided market, I am also interested in technical aspects of the evolution of Spotify’s platform and how the technical evolution of the platform connects to Spotify’s stakeholder relations. Therefore, I will use this subparagraph to reflect on software studies approaches that study platforms in order to extend my approach in a technically oriented manner. An approach, which connects to the computational approach Montfort and Bogost are advocating, comes from Langlois et al. They describe a different example of a platform-based methodology in the article "Mapping Commercial Web 2.0 Worlds”. They discuss software platforms instead of Montfort and Bogost who discuss hardware platforms. They describe how Web 2.0 platforms enable interoperability between different applications. Interoperability in essence means that they can ‘work’ or ‘communicate’ with each other through a defined set of protocols. Using this concept they claim we should look at current web platforms as an assemblage of protocols, in which each protocol acts as a modular part (Langlois et al. n. pag.). With this in mind, they describe a platform as “a convergence of different systems, protocols, and networks that connect people in different and particular ways and thus offer specific conditions of possibility” (Langlois et al. n. pag.). In order to analyse in what manner platforms offer these “specific conditions of possibility” they claim we should look at the way platforms are organised to enact on “specific economic, legal, and cultural dynamics into account” (Langlois et al. n. pag.). To analyse commercial web 2.0 platforms in a critical manner we should look at the different dynamics which all play a role for the existence of that particular platform. We need to look at these platforms as “inhabitable worlds within which users can exist and extend themselves according to specific techno-cultural logics” (Langlois et al. n. pag.). In other words, in order to critically analyse platforms we need to focus on the

23 way platforms create worlds or environments in which all involved parties take part in specific ways due to the possibilities and restrictions which are formed through the protocols of the platform in question. Their critical approach to analyse platforms is based on ‘disaggregation’, “a method through which to strip parse and rip the platform into its components” (Langlois et al. n. pag.), in order to analyse in what ways the specific components of a platform are responsible for the way a platform gains connections with third parties outside the platform in question (Langlois et al. n. pag.). The challenge of this method consists of the way ‘traffic tags’ can be identified and associated with other objects in order to analyse in what ways information gets circulated across different web platforms (Langlois et al. n. pag.). ‘Traffic tags’ are identifications of web objects such as videos, pictures or music songs that are being circulated across platforms (Langlois et al. n. pag.). According to Langlois et al. the analysis of application programming interfaces (APIs) is good method to analyse connections between platforms (n.pag.). I will return on this later. The analysis of Spotify’s APIs would leave some stakeholder activities under examined because this would mainly allow me to elaborate on developer activities. Since Spotify’s platform enables their stakeholders to engage with its platform in different ways, I will make use of the concept of ‘affordance’ to elaborate on the different ways the distinct stakeholders are enabled to engage with the platform. “Affordances specify the range of possible activities” (Norman 41) on which a user can interact with a platform. By considering the affordances of all involved groups it becomes possible to disentangle how the involved groups were enabled and constrained to use Spotify’s platform is specific ways over time. With this method I will divide Spotify’s platform into its specific components, namely by elaborating on the affordances of developers and users. In the case of Spotify, the focus on the affordances developers and users is mainly important since these affordances are most significant in the sense that these influence Spotify’s value amongst stakeholders the most. The focus on the distinct affordances of Spotify’s stakeholders allows me to connect these findings to the basis of my analysis, namely how Spotify as a business in a multi-sided market orchestrates its relationships with its stakeholders and how the

24 affordances of its stakeholder influence Spotify’s exhibition of network externalities. By elaborating on Spotify’s available APIs over time it becomes possible to analyse the affordances of one group of stakeholders, namely the developers. Taina Bucher defines the API as the “standardized methods for allowing one software component to access the resources of another component” (Bucher n. pag.). According to Bucher, the analysis of APIs can reveal how a platform is designed in order to enable interoperability between different systems (n. pag.). An example of frequently used APIs is that of social media companies. They build APIs to enable third-party developers to build applications on top of the social media platform in question. In this way APIs became very important for these companies in order to extend their reach across different platforms on the web (Bucher n. pag.). Andreessen claims an API is the most important characteristic of platforms and it distinguishes them from other web services or applications in the sense that this technology makes them programmable (n. pag.). With programmable, Andreessen aims to emphasize the way APIs enable access to the functionality of platforms. Helmond claims that the analysis of API’s and, therefore, the analysis of the way in which platforms allow for (external) programming or running (external) applications, can be helpful to analyse the technological development of platforms what is also useful to elaborate on stakeholder relations (2015b 3). The API enables developers and third parties to integrate and build other applications on top of the platform in question, which has the effect that an easily accessible API is a helpful method for platforms to extend their reach on the web (Helmond 2015b 4). By analysing platforms according to the different available APIs they use, it becomes possible to research how third party developers are enabled or constrained by the type of programmability platforms enable (Helmond 2015b 5). Widgets (elements through which people can interact across different platforms such as play buttons) are another example of engagement of developers and they play an important role in the enabling or constraining of third parties’ additions to existing platforms (Helmond 2015b 6). Therefore it is interesting to analyse which partnerships with supporting widgets and APIs platforms have entered into in order to extend their services

25 across other websites and platforms. Helmond claims the analysis of APIs and widgets can be helpful to understand a website ecology which is an overview of the “complex socio-technical relations between websites, users, social media platforms, tracking companies, other actors and their environment” (Helmond 2015a 116). Helmond claims this type of research is helpful to understand how the programmability of platform through the use of APIs produces data that is valuable to websites and their stakeholders (Helmond 2015b 5). In this way the analysis of affordances of developers and those of other stakeholders are interesting to elaborate on since they create value amongst the stakeholders and therefore, influence the exhibition of network externalities. These relations are interesting to analyse but in the case of my research of Spotify as a platform, a website-ecology will not suffice since I am not elaborating on Spotify’s website but on their platform. Therefore, another approach from José van Dijck, who studies platforms as ‘microsystems’ within a ‘platform ecosystem’, is fruitful to combine with Helmond’s approach. Van Dijck coins the relations of interconnected platforms as “the ecosystem of connective media” (21). She proposes to look at platforms as microsystems, which are all sensitive to changes within the ecosystem (21). Therefore, to understand a ‘platform-ecology’ it is of interest to analyse how changes within third party websites or platforms, affect the platform’s infrastructures, and vice-versa. While understanding a platform- ecology, van Dijck emphasized is in significant to analyse how the history of platforms a microsystems illustrate how tensions play a role such as the “tension between community-based connectedness and commercialized connectivity” (van Dijck 155). Since Spotify’s platform enables a range of varied affordances for their stakeholders that can be seen as improvements of user experiences but also as ways to collect valuable data, the critical analysis of the tensions described by van Dijck is a useful approach for my research because this reveals in another way how network externalities are exhibited and influenced. I will combine the approach of Helmond, who analyses API’s and how they enable platforms to collect valuable data through developer affordances, with the approach of van Dijck which is more connected to the study of platforms such as Spotify by conceptualising them as microsystems with a focus on tensions that play a role through affordances of other stakeholders such as users. In this way I

26 will use the combination of both approaches to reflect on the affordances of stakeholders and how these affordances create value amongst them and therefore, are connected to network externalities.

27 4. Method Since the main part of this thesis is based around the way Spotify orchestrates its relationships with its stakeholders, I will base the largest part of my analysis on Spotify as business in a multi-sided market. Firstly, I will describe how Spotify entered the multi-sided market by elaborating on the attraction of their distinct groups of stakeholders during the entry phase of the platform. While describing this I will focus on how the attraction of these stakeholders create value amongst those groups and therefore how network externalities play a role for Spotify as a multi-sided market. Next to this, I will make use of the microeconomic approach Rieder and Sire advocated in order to focus on the evolution of Spotify’s platform concerning the growth of the distinct groups of stakeholders. By elaborating on the choices made by Spotify’s owners during the evolution of the platform, my aim is basically describe what strategies Spotify uses in order to expand their groups of stakeholders and furthermore, illustrating aspects of innovation and evolution where possible conflicts of interest play a role. After describing Spotify as a multi-sided market I will research how Spotify employs different communication strategies towards its separate stakeholders, for example by analysing the different webpages Spotify uses in order to address these distinct stakeholders. In this way it becomes possible to reveal what Gillespie calls the ‘politics of platforms’ and how these are related to the coordination of Spotify’s stakeholders. After analysing Spotify’s stakeholder relations, I will make use of the software studies perspectives in order to extend my analysis of Spotify’s stakeholder relations through the evolution of the technical aspects of the platform. As described earlier, I will disaggregate the platform by analysing the affordances of the users and developers in order to illustrate how Spotify tries to satisfy its stakeholders and to explain how these modes of engagement provide valuable data for Spotify that can be used by Spotify in different manners to create more value amongst their stakeholders. As described in chapter 3, I will elaborate on the affordances of developers by analysing the types of APIs and what types of engagement these APIs evoke. In this way, I will illustrate how connections between platforms and other third parties can be analysed in order to understand the platform-ecosystem in which Spotify is embedded and I will

28 follow Helmond in analysing how these APIs also produce data what can be valuable for other stakeholders. In this way I will show how the software studies perspectives can extend the analysis of Spotify as a multi-sided market through economic perspective, by emphasizing different aspects of platform evolution that influence the exhibition of network externalities and therefore, the value amongst the groups of stakeholders. My corpus will consist of materials that can be acquired by performing what Kirschenbaum calls documentary analysis. As described earlier, these materials can consist of Spotify’s developer documentation, developer blogs, company blogs, news articles, privacy policies, terms of service and help documentation. These materials, which are helpful to elaborate on the perspective of Spotify’s owners, are important to analyse what motivations Spotify had while innovating their platform. In this way, these materials provide me with an opportunity to reveal possible conflicts of interest. To extend my corpus amongst other perspectives that study the evolution of Spotify, I will complement the documentary analysis with the kind of materials that are organized to surround, shape, support and provide context for Spotify’s platform, the so-called paratexts as described by Consalvo. These paratexts are publicly accessible and consist of developer interviews, end user responses, software- blogs, technology-blogs, forums, news articles, Q&A websites, and many more materials, which were all produced along the evolution of Spotify’s platform. Thus I follow Apperley and Parikka’s approach who claim media archaeological aspects should enrich the field of platform studies in order to develop an historical engagement with the platform. By using the documentary analysis with emphasis on paratexts I will be able to establish a chronological overview of the way Spotify’s platform has evolved and introduced innovations to the platform’s services. Occasionally, I will also use academic writings in order to place my findings within wider academic perspectives.

29 5. The Evolution of Spotify’s Platform In this chapter I will describe my analysis of Spotify’s platform as a multi-sided market, by focusing on stakeholder relations en technical innovations that are related to the orchestration of those relations. In paragraph 5.1, I will describe my analysis of Spotify from the economic perspectives to show how Spotify orchestrate its relations towards the content providers, users, advertisers and developers and how the involvement of these stakeholders are related to the exhibition of network externalities. In paragraph 5.2 I will describe how the affordances of especially the users and developers over time produce more value amongst the stakeholders groups.

5.1 Spotify as a Multi-Sided Market While describing Spotify as a multi-sided market, will focus on the entry phase and the evolution of stakeholder relation. Firstly, I will describe how the introduction of the platform shows how Spotify connects its stakeholders in a specific way, and I will explain how network externalities play a role through the orchestration of stakeholder relations. Next to this, I will dedicate the reat of the paragraph to describe how Spotify as a platform has evolved and how the evolution affected its stakeholder relations. Hereby, I will reflect on Spotify’s expanding strategies and communication strategies towards their stakeholders, in order to explain how what motives Spotify had while expanding and how these motives sometimes can be based on demands of stakeholders.

5.1.1 The Entry Phase In order to solve the ‘chicken-and-egg’ problem (Rochet and Tirole 990), Spotify needed to get the most important group of stakeholders, the major record labels, on board in order to realize the most fundamental aspect of their service: to provide music to their targeted clients. Therefore, the entry phase of Spotify’s music-streaming platform was characterized by great investments before the platform was actually launched. Spotify has been in development since 2006, when the company Spotify AB was founded by Daniel EK and Martin Lorentzon in Sweden (Sawers). As described in chapter 1 and 2, an important factor that contributed to the potentials of music-streaming services, was the development

30 of digital music and as a consequence the rise of illegal file sharing. The global revenue for the recording industry, was at its highest in 1999 with $27 billion revenue. Thereafter, a decline set in and the revenue almost halved to $14 billion in 2008. (Greeley). As I described in chapter 2, Spotify offered a solution to this problem because music streaming was a good alternative for piracy, and that there were great potentials of new revenue in the streaming business. It took Spotify two years of negotiations with the world’s biggest record labels. But eventually it led to a licencing agreement with seven big music companies in 2008, namely Universal Music Group, Sony BMG, EMI Music, Warner Music Group, Merlin, The Orchard, and Bonnier Amigo (The Spotify Team). How did Spotify convince these mighty record labels? It has not been confirmed up to now, but various reports tell the story that Spotify managed to get the record labels on board by offering them a cheap entry as stakeholders (Jerrang). Based on intercepted financial documents, which were obtained by Computer Sweden, these reports claim that the record companies combined got a share of 18 % of Spotify’s stock for the small amount of €8.800 (Jerrang). There are also other reports that describe how Spotify made use of third party investments before the launch of the platform (Growthhackers) that also illustrate it was not easy for Spotify to convince the most important music content providers at that time to use Spotify as an intermediary in order to bring music to the people. One way or another, these seven major record labels got on board and they all agreed to an experiment by making their entire catalogue available, which has led to the launch of Spotify’s platform on October 7th 2008 (The Spotify Team). Interesting to note is how Spotify has used user activity in order to provide a good working service. The biggest threat for the music industry was the peer-to-peer (P2P) technology, which constituted the most important underlying technology for illegal file-sharing services. This technology, which is better known as the underlying technology for the BitTorrent client uTorrent2, was developed by Ludvig Strigeus. Interestingly, Spotify used the exact same technology as backbone for its platform with help from Strigeus. P2P technology proved to be a smart solution for Spotify in order to connect its users smoothly, because less servers and less bandwidth were needed to provide its users with

2 http://www.utorrent.com/

31 good working music-streams without having to invest heavily in servers and other hardware (Ernesto 2011). Based on data provided by Spotify in 2011, it became clear that Spotify used three main sources to provide streams to their users. These were local cache, which allowed people to play music that they played before from a local storage area, P2P technology, and servers. Most streams were played from local cache, and from the remaining streams, 80% were accessed through P2P technology (Ernesto 2011). In this way, Spotify made it possible to let its users experience one of the most important characteristics of the platform: a very low latency what made it possible to play tracks almost instantly with a median delay of 265 milliseconds (Ernesto 2011). This is what made Spotify’s platform very attractive to its users and in this way, Spotify’s users contributed to Spotify’s infrastructures. Thus the technology that was the basis for most illegal file-sharing services was paramount to Spotify’s success. Spotify was able to save millions of dollars on servers while user amounts still grew. However, in 2014 Spotify started to phase out P2P technology, by exclusively relying on its growing amounts of servers in order to provide a “best- in-class” service for its users (Ernesto 2014).

Figure 1 - When did the stakeholders came on board?3

During the launch of the platform, Spotify connected the content providers to two other important groups of stakeholders, namely the users and the advertisers. Already quickly from the start onwards Spotify used the freemium model explained in chapter 2, so there were two kinds of users: free-tier users and premium-tier users. By bringing together these various stakeholders Spotify

3 Timeline made by myself, based on data obtained from Spotify’s news website: https://news.spotify.com

32 became a multi-sided platform. At the launch of the platform, in 2008, Spotify was made available to users in UK, Germany, France, Italy, Spain, Finland, Norway, and Sweden (PRNewswire). At the launch, each person who was willing to contribute to on going test activities got a free account, and further a limited number of free accounts were made available through invitation only (The Spotify Team). If customers were not willing to become part of the test community and also were not given a personal invitation, their only option was to purchase a premium account (The Spotify Team). Spotify’s free-tier was (and still is) characterised by advertisements and premium users enjoyed more privileges than free-tier users (which I will explain further in the next paragraph). The invitation-only option for free-tier users constituted an important reason for Spotify’s rise, because it helped Spotify to manage the growth level of users, and by providing each user with five invites they added a viral element since each user was willing to share Spotify’s user experiences and invite their friends (Sawers). Another important aspect of the freemium business model is that it acted as a bridge between piracy and legal music listening options. Figure 2 shows how the different groups of consumers, divided by age, are less attracted to illegal music listening when offered a free, and legal alternative according to independent studies provided by Spotify itself (“Spotify Explained”).

Figure 2 - Effect of free and legal streaming services on piracy. Source: http://www.spotifyartists.com/spotify-explained/

33 As explained in chapter 2, before Spotify’s platform was launched, the offerings to music listeners were multi-fold and consisted of options for which one had to pay as well as those that were for “free”: CD’s and vinyl record, pay-per-track, music streaming on Youtube, and music (illegally) downloaded by making use of the growing amount of file sharing services, such as Napster and Soulseek (Doerr et al.). Spotify offered an attractive alternative to those that made use of illegal music services by offering its free-tier. It provided an easily usable service supplemented with a revolutionary premium service, which allowed users to pay a respectable price in order to gain access to the unlimited listening of music from a large (already from the beginning) and growing database of music. In this way Spotify achieved to provide an attractive service, which got many users on board quickly, that appealed to the advertisers and the content providers. And this was fundamental to become a business in a multi-sided market. Multi-sided markets are often characterised by three distinct groups of stakeholders as shown in figure 3.

Figure 3 - The three-sided business model. Source: https://marketainment.org/2015/03/29/two-at-the-price-of-three-when-apple-trims-the- streaming-tree/

Spotify’s platform is slightly different since they also connected a fourth group of stakeholders, namely the developers by investing in an API that was available to use since April 2009 on which I return later (Figure 1). The multi-sided business model of Spotify constituted what Katz and Shapiro called, the exhibition of network externalities (94). In order to create these network externalities, Spotify

34 was obliged to invest a lot in the first group of stakeholders, the content providers. These record labels were essential for Spotify to build up its offerings of content to the future users, Spotify’s database of music files. By providing a free subscription, Spotify was able to attract many users who made use of the free-tier service, who in turn constituted a sizeable group that attracted advertisers. The advertisers are the third important group of stakeholders who rendered another source of revenue for Spotify, next to the revenue gained from premium-tier users. The advertisers had to pay to make use of the platform so that they could connect with (future) customers and their reaching out to those customers was the price the free-tier users had to pay for their use of Spotify’s platform. Free-tier users could not listen uninterruptedly to music because of the advertisements that they had to take in. This illustrates how advertisers play a role in the attraction of premium-tier users because they influence they experience of influence the free-tier users, who were able to experience the benefits of using Spotify’s platform with interruptions by advertisements and therefore, are attracted to use the premium service to enjoy an even better experience. The sources of revenue that Spotify was able to obtain from paying premium-tier users and advertisers were in their turn important for the satisfaction of content providers, what I will further explain in the next part. Next to this, Spotify invested in the creation of an API in order to attract the developers to make use of the platform. How the developers constitute a valuable group of stakeholders that are also important for Spotify’s network externalities can be further explained through the analysis of the affordances they are engaged with on which I will further reflect in paragraph 5.2. This shows how Spotify invests much in the attraction of content providers and developers, with the target to gain profits from users and advertisers. As described above, Spotify’s revenue is important for the satisfaction of its content providers. Spotify splits its entire revenue, coming from paying advertisers and premium users, by paying 70% to the content providers, and to keep 30% for itself (“Spotify Explained”). The 70% of revenue is split “in accordance with the popularity of their music on the service” (“Spotify Explained”). Spotify applies a complicated formula, explained on their website,

35 that decides which exact amounts the record labels and artists gain from Spotify’s 70% of revenue (see Figure 4).

Figure 4 - Spotify's royalty payout model. Source: http://www.spotifyartists.com/spotify-explained/ As shown in figure 4, Spotify decides the exact share of artist streams, by dividing the streams of a particular artist by the total amount of streams. After deciding the share of particular artists in accordance with their popularity, 70% of this share is negotiated between Spotify and the labels and publishers who are the rights holders of the mechanical reproduction and performance of the available music on Spotify (“Spotify Explained”). The precise outcome of these negotiations also depends on local rules and regulations as for each country. Spotify gives the United States as an example on their website, where laws and other existing agreements decided that publishers were to receive 21% of the amount that master recordings owners gained (“Spotify Explained”). As shown in figure 4, this complicated formula, which works out differently depending on the particular regulations of countries artists and record labels are linked to, ultimately lead to the artist royalty rate. The exact amount of revenues artist make out of their streams, is decided by the contracts those artists have with their record label company and publishers (“Spotify Explained”). By analysing the connections between the different stakeholders Spotify brought together with the launch of their platform, it became clear how the attraction of all distinct groups characterised Spotify as multi-sided market. This analysis showed how the distinct groups influence the attraction of other groups, and vice versa and therefore illustrate how network externalities work in the case of Spotify’s platform. In the next paragraph, I will reflect on the way Spotify coordinated these connections between their distinct groups of users, by analysing the efforts the platform made to attract more users from all groups of

36 stakeholders, what motives Spotify’s owners had and how these strategies enabled Spotify’s platform to expand.

5.1.2 Expanding Strategies and Growth of Stakeholder Groups After the entry phase, the challenge for Spotify was to keep all stakeholders satisfied and to put efforts in enabling the growth of all distinct groups of stakeholders. Before Spotify was officially launched, they provided influencers and tech reporters with a so-called beta version of the platform, which helped Spotify to control the costs of developing the service, to improve on the user experience, and to create a hype surrounding the launch of their platform since these influencers and tech reporters praised the platform (Growthhackers). While launching the platform in Europa, Spotify’s method to release free-tier accounts on invitation only, constituted a scarcity which further influenced the willingness to anticipate inside their target market (Ludwig). An important step in attracting more users to the platform in Europe was made by Spotify on February 10th 2009. On this day, Spotify explained their invitation system enabled them to control their user growth in order to provide a problem free service but from this day, Spotify enabled everyone in UK to register for their free service without an invitation (Spotifysehr 2009a). In the official announcement they explained they want to make sure Spotify’s platform kept providing a stable service without problems, so if the amount of users would grow too fast they might have to re-instate their invitation system (Spotifysehr 2009a). This effected in a huge growth of free-tier users, and along with the launch of the mobile version of the platform (which was another fundamental aspect in attracting users on which I will further reflect in paragraph 5.2), the users of the platform grew so rapidly, that this forced Spotify to re-instate their invitation-only system in the UK due to the huge demand of free-tier subscriptions on September 10th 2009 (Spotifysehr 2009b). In that same announcement Spotify explained that it was planning to remove the needs for invitations soon in all other launch countries (Spotifysehr 2009b). These actions illustrate how Spotify carefully coordinated their groups of users in order to create a huge eagerness of users in their target markets. With these strategies, they managed to obtain the user amount of 6.67 million users, of whom 1 million

37 were paid subscribers before their actual launch in the United States in 2011 (BBC News). Spotify had great expectations when launching the platform in the United States due to the great amounts of potential users. Consequently, Spotify put a lot of effort in negotiations with the four major record labels. The plan was to launch the platform in 2010 but it took till 2011. The negotiations proved to be more troubling than expected due to the demand of the record labels to provide the platform without a free advertisement-supported tier and with less benefits for premium users (Geere). While negotiations took place, on the background the willingness to anticipate amongst their potential users in the United States grew rapidly. Spotify applied the same strategies as used during their pre-launch phase in Europe, such as gaining press attention by influencing writers on techblogs (Growthhackers). Next to this, the demand for Spotify by potential users outside Europe resulted in many ‘backdoor initiatives’ that were being explained on several technology-blogs, forums, and websites. This explains how UK-based proxy servers could bypass geographical limitations in order to gain access to the Spotify’s service outside Europe (Anoop). Eventually, the troubling negotiations between Spotify and the major record labels resulted in the US launch of the platform on July 14th 2011 (Kovach). During the launch Spotify introduced new tier options, which were probably part of the deal made with the content providers. As it did in Europe, it provided a free-tier membership, which again was an invitation-only tier at the start, and a premium subscription with more benefits that was $9,99 per month. Next to those tiers, it introduced the Spotify unlimited tier which was $4,99 per month. With this membership the user could stream music on the computer version of the platform without the interruption of advertisements (Kovach). In this way Spotify used another strategy by coordinating the user group in different ways with its three tier options. As shown in figure 5, the launch in the United States contributed to a large increase of visits on Spotify’s website and eventually to a rapid increase of Spotify users.

38

Figure 5 - Spotify.com visits in the United States: Source: https://growthhackers.com/growth- studies/spotify

As shown in figure 6, Spotify’s amount of free-tier and premium subscribers (the unlimited tier is no longer available) has grown to high numbers.

Figure 6 - Spotify's user growth. Source: http://www.spotifyartists.com/spotify-explained/

Spotify’s strategies which were initiated in order to carefully coordinate its groups of users, proved to be successful as shown in figure 5. The company managed to achieve over 75 million users in 2015, of whom 20 million were paying premium subscribers and the rapid increase of users is still going on. The strategies Spotify used during their launch phase in Europe and the United States were used in every country Spotify has launched its platform, which amounted to 58 countries (“Spotify Explained”).

39 Next to the strategies that were initiated in order to attain users for both the free-tier and the premium-tier, Spotify was obliged to attain more users from their first group of stakeholders, namely the content providers, who in their turn would attract more users. The growing amount of users constituted an important aspect of attracting record labels and artists, and Spotify managed to enlarge its database of available songs to more than 30 millions tracks (Williams). While Spotify’s database still grows every day, the challenge lies in attracting the most popular artists to the platform. For example, The Beatles were not available for streaming for a long period, due to endless negotiations, until their entire catalogue was made available during Christmas, December 24, 2015 (“Here, there and everywhere”). With other popular artists, negotiations seemed to be even more troubling. For example, Taylor Swift was one of the most popular artists on Spotify as 25% of Spotify’s users had streamed her songs, but in 2012 Swift refused to release her new album on Spotify. In her opinion Spotify’s platform did not provide fair payment practices due to the high amount of free- tier users leading to low revenues of $0,006 and $0,0081 per stream (Ellis- Petersen). Taylor Swift is one of few popular artists who pulled their music catalogues from Spotify’s platform, such as Radiohead’s lead singer Thom Yorke, Beyoncé and The Black Keys who claim their actions to boycott Spotify’s service are attempts to defend the rights of new and upcoming artists (Ellis-Petersen). This constitutes a problem for Spotify, since many users will not be attracted to use the platform when their favourite artist is not available on the platform, and in the meantime, Spotify’s competitors who managed to get those artists on board, have created an advantage in order to attract those groups of users (Ellis- Petersen). Therefore, challenges lie behead in Spotify’s quest to make all popular music available to everyone. Another challenge in creating a large database with many different music styles lies in the attraction of niche and indie artists. As explained in paragraph 5.1.1 Spotify’s royalty payout system is not very profitable for unpopular artists since their small share of streams divided by the total number of streams on Spotify, constitutes a relatively small source of income compared to the popular artists on Spotify. Without the attraction of upcoming, new and relatively unkown artists, Spotify’s database of available songs would be a lot less attractive to many music discoverers. Spotify’s co-

40 founder Daniel Ek claims with the growing amounts of users, revenue streams for artists will be better on the longer term (Campbell). In order to further support this statement, Spotify explains on their website how niche and upcoming artists will benefit from making use of Spotify’s platform in the future. As shown in figure 7, Spotify estimates much more revenue streams, even for niche indie albums.

Figure 7 - Current and estimated royalty payouts. Source: http://www.spotifyartists.com/spotify- explained/ The monthly paid royalties for niche indie albums were $3.300 in July 2013. Based on the current growth statistics, Spotify estimates the monthly royalty pay-outs for niche indie albums to rise to an amount of $17.000 based on an estimated amount of 40 millions premium users. While these statements seem interesting, it is at least noteworthy that Spotify reveals no specific information surrounding their claims. Next to Spotify’s statements about a positive outlook for both unknown as well as well-known, popular artists, many believe Spotify’s platform constitutes a possibility for good exposure for most indie artists and to use the platform as a marketing technique (Campbell). However, it will be interesting to see how Spotify will cope with the demands of record labels, popular artists, and upcoming artists, in order to provide a varied database which could attract all music listeners in the world to join Spotify’s platform. While Spotify’s business model of the multi-sided market described above sounds like a success, the company is still not able to gain profits from their business. Based on a filing from Spotify’s office registered in Luxembourg, many reports are being written that claim Spotify’s business model is not able to create sustainable sources of revenue (Titcomb). As shown in figure 8, while Spotify’s

41 revenue grew in the last years, their profits remain negative due to growing losses.

Figure 8 - Spotify's growing amounts of revenues and losses. Source: http://www.telegraph.co.uk/technology/2016/05/24/spotifys-revenue-hits-2bn-but-when-will-it- make-money/

Even after the publication of these revenue statistics, Spotify’s team claims 2015 was their best year ever, since revenues increased with 80%, while losses only increased with 10% (Titcomb). However, it will be interesting to see how Spotify will develop their revenues in the coming years in order to become a sustainable business. Another important strategy for Spotify to extend their group of users was by gaining partnerships with third parties. The most important one was arranged on September 22, 2011, when Daniel Ek announced their partnership with Facebook during Facebook’s f8 developer conference (Ek). As shown in figure 9, Spotify’s partnership with Facebook boosted user amounts with a million within days.

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Figure 9 - Spotify's user growth following on the f8 developer conference. Source: http://www.adweek.com/socialtimes/spotify-gains-million-f8/269186?red=if

This partnership also enabled Spotify users to connect through Facebook on which I will reflect in paragraph 5.2. Next to this, Spotify’s user activity was possible to share in the Facebook News Feed, which was obviously an important marketing strategy in order to attract many users (Growthhackers). As described by Eran Fischer, Facebook audiences are significant for producing value since the nature of social media, characterised by a huge amount of connections, is responsible for greater consumer mobilisation, audience participation and therefore a valuable marketing strategy (61-62). Spotify’s rapid user growth following on the f8 developer conference illustrates this aspect.

5.1.3 Demands of Content Providers and Tier Restrictions The restrictions and possibilities the distinct tiers provided over time are party made due to the demands of Spotify’s content providers. At the time of its launch in 2008, the most important distinction between the free and premium tier was ad-free listening, which was available for premium users only. However, evolving restrictions and possibilities from their distinct tiers show how Spotify attempted to enlarge the group of premium subscribers and therefore, cope with demands of record labels. In 2010, however, Spotify introduced a new restriction for free-tier users. As a result of troubling negotiations with record labels surrounding the launch in the United States, Spotify restricted free-tier listening up to 20 hours per month, charged with advertisements (Buskirk 2010). In 2011, they went even further by restricting all free-tier users to six months of free ad- supporting listening, and after this period, they were limited to 10 hours of free listening per month, with another limitation to play each track a maximum of

43 five times a month (Buskirk 2011). In the years thereafter, Spotify came back to these restrictions and created more possibilities for free-tier users again. The rapid growth of its user amounts made it possible to convince record labels to remove free-tier restrictions over time. On March 29, 2012, Spotify announced unlimited free listening for free-tier users in the United States, and it removed the restriction of five plays per track in other countries, except for the UK and France, where the 10-hours-per-month restriction remained in place (Startlin). On March 19, 2013, the five-plays-per-track restriction was also removed in the UK, and on December 11th in that same year Spotify introduced a free-tier streaming feature on smartphones and tablets, which allowed free-tier users to play shuffled tracks from artists as well as playlists from their mobile devices (Startlin). In January 2014, unlimited listening was made possible again for all Spotify users across all countries, when a news report from Spotify revealed that all time limits were removed across all platforms. It enabled free-tier users to listen unlimitedly to any song they wanted (Planas Rego). The evolution of restrictions and possibilities for free-tier users revealed what Rieder and Sire described as ‘conflicts of interests’, since Spotify’s aim was always to provide a free and unlimited music service for free-tier users. The restrictions imposed by Spotify, especially in the beginning, were only there to keep record labels satisfied. At the moment the number of free-tier and premium users yielded enough revenues the limitations were removed. While the free-tier user experience had evolved again into unlimited listening, the features of the premium tier still show how Spotify used different restrictions and possibilities across their tiers in order to persuade users to subscribe to their premium service. As shown in figure 10, the premium tier still enjoyed a variety of privileges over the free-tier, such as ad-free listening, the ability to play songs on demand on mobile devices, high quality audio streaming (320 kbps), and the possibility to create offline playlists in order to listen to music on a device without the need for an internet connection.

44

Figure 10 - Free versus premium. Source: https://community.spotify.com/t5/Help-Accounts-and- Subscriptions/Premium-vs-Unlimited-vs-Free/td-p/113292

In this way Spotify still uses strategies that contribute to attracting premium users, which is also important to satisfy the demands of content providers, who in turn were key to attract users in the first place.

5.1.4 The Politics of Spotify’s Platform As described above, Spotify’s multi-sided business model and the efforts and strategies Spotify used to enlarge their groups of distinct stakeholders, constituted the exhibition of network externalities in which all distinct groups attracted other groups in both directions. This allowed Spotify to develop a strategy to communicate to its stakeholders in a variety of ways what can be seen as an example of what Gillespie coined as the politics of platforms. This is also illustrated by the different webpages Spotify uses in order to communicate to their distinct groups of stakeholders. Spotify communicates towards its content providers with its page “Spotify for artists”. On this page Spotify presents the reasons, on which I reflected earlier in this chapter, why Spotify is a good opportunity for record labels and artists. Along with their claims made about the decline of piracy, the growing amounts of paying users and therefore, royalty payouts, they use this webpage to present a range of independent studies which all contribute to the attraction of content providers. Spotify uses its home page to attract users. On this page Spotify presents the benefits of becoming a free-tier and a premium user. Next to this, the company claims its large database enables

45 everyone to play their favourites, discover new tracks, and build their perfect collection (Spotify Homepage). However, this is in many cases not true since some popular artists refused to make their catalogues available as I described above. Also, when people want to dig deeper to discover new tracks, they will discover Spotify still needs to resolve the challenge to attract many more niche, upcoming, and independent artists to join the platform. Spotify uses another page, which is dedicated to advertisers, namely the “Spotify for Brands” page. On this page Spotify presents several strategies to lure as many advertisers in as possible, and to make use of Spotify’s platform for promoting their brand. By presenting statistics from their internal data received from the activities of their free-tier users, they compare their users with radio listeners by claiming an average free-tier user spends 148 hours a month listening to music on Spotify, that users are more and more using the mobile application, and these listeners make Spotify’s service very influential by sharing their activities on several social network platforms (“Spotify for Brands”). In this way, Spotify is trying to convince advertisers of the fact that Spotify is becoming more influential than radio. This makes the platform more suitable for advertisers because an increasing number of listeners favour streaming services over traditional radio and use those streaming services during the whole day, while radio listening activity mostly occurs in the morning. In addition, Spotify mentions that more people use different devices to stream music what complements their claim, which states that their listeners are becoming the best reachable consumers for advertising. Furthermore, Spotify presents itself as being able to use data from its users for target advertising, by profiling what their users are listening to, who they are (age, gender, and geographical information), and when, what and how these users stream music on their platform (“Spotify for Brands”). Altogether, the Spotify For Brands page shows how the platform uses several statistics (which are obtained from their own studies) to get advertisers on board. The different pages Spotify uses to communicate to their stakeholders illustrate how a platform can make use of what Gillespie calls the discursive way the term ‘platform’ can be applied to enact in specific ways on the different constituencies on which the existence of the platform depends. They present Spotify as a platform for free music-listening for free-tier users, they present it as platform

46 for advertisement-free music listening for paying users, in the same time they present it as a suitable platform for advertisers based on the high amounts of free-tier users, which is a negative aspect for the record labels and artists, and they present it as profitable platform for record labels and artists based on their growing amounts of paying users, which is a negative aspect for advertisers. Being a multi-sided platform, along with various strategies in order to sustain the business model, such as the way it introduced its service similarly in the launch countries with a variation of pricing strategies, allowed Spotify to enlarge their database, user amounts, and therefore their advertisement revenue. This shows how a platform in a multi-sided market can be successful by coordinating its groups of stakeholders in such a way that network externalities play a role in creating value amongst the stakeholders. The evolution of Spotify’s platform shows how tensions play a role between stakeholders. Since content providers prefer a high amount of premium-tier users that are important for their royalty payouts, negotiations in order to make licencing deals proved to be troubling since Spotify enjoys a high amount of free-tier users. Therefore, restrictions and possibilities for attracted and potential users have not only evolved according to Spotify’s strategies to maximise profits, but also according to the demands of content providers. Therefore some aspects of Spotify’s evolution, especially the restrictions over time illustrate how conflicts of interest play a role. However, the growing amount of free-tier users what goes hand in hand with increasing advertisement revenue, eventually became significant enough to convince content providers to remove restrictions on the free-tier. Also the growing amount of premium-tier users has been an important aspect in order to stay attractive to content providers. These tensions show how the exhibition of network externalities works in much ways, and is this way Spotify allows itself to communicate in varied ways based on those network externalities through separate pages the use to address their distinct stakeholders. Therefore, a focus on communication strategies towards stakeholders proved to be helpful to analyse in what ways stakeholder relations can be orchestrated and how management and economic perspectives can be enriched by a focus on the politics of platforms.

47 5.2 Affordances of Stakeholder Groups In this paragraph I will describe how the affordances of users and developers are evolved not only to improve the usability of Spotify’s platform but more importantly to create value amongst the stakeholders groups by creating more manners in which the stakeholders can interact with the platform and in this way, enable even more affordances. Firstly, I will describe how user affordances can be seen as activities that produce value, secondly I will describe how Spotify has made various APIs available for developers and how these developers are important for the platform-ecosystem wherein Spotify is embedded.

5.2.1 Users Since the launch of Spotify’s platform, users where obviously engaged with the platform through the main affordances namely: listening to music and creating playlists. Spotify has put various efforts in innovating the platform in order to improve the platform. An important development was the introduction of Spotify’s mobile apps. On September 6 2009, Spotify announced the introduction of its mobile service for premium users on the iPhone, iPod touch, and Android platforms (“Spotify Mobile”). In this way they were able to capture an entire new group of users who wanted to have their music readily available, all the time and carry it with them, so to say. This also contributed to being an even better alternative for piracy since music listeners had up to that moment only few options to listen music legally on their mobile phones. A common method which was used to listen to music on mobile phones was via pay-per-track downloads via iOS, and Apple restricted users in some ways, for example through DRM (digital rights management) protections (Caldwell). The introduction of Spotify’s mobile apps constituted another important reason for the satisfaction of record labels. The new group of mobile music-listeners provided record labels with yet another audience they could tap into. In December 2013, Spotify introduced its mobile services for free-tier users, who became able to stream shuffled tracks from artists and playlist. Between 2013 and 2014 this led to a tripling of the share of users listening on mobile devices (Growthhackers). In this way Spotify constituted another important aspect for the attraction of advertisers since the high amount of mobile free-tier users, constituted another way for advertisers to

48 extend their reach amongst their audiences. Parissa Haghirian, Maria Madlberger and Andrea Tanuskova describe mobile advertising is of much value for advertisers since this allow them to reach people individually through targeted advertising, and customers can be reached without time and location barriers (1). Therefore, the introduction of Spotify’s mobile apps for the free-tier prove to be valuable in order to extend their revenue gained from advertisers. Next to this Spotify evolved in order to provide a social network within the platform. With the help of Facebook’s platform, Spotify allowed users to register via email or through Facebook Connect. With this connection users were able to see their friends’ activity within Spotify’s platform, such as what friends were listening to, which artists and user profiles they followed, and the playlists they created (Growthhackers). In 2013, Spotify enhanced their social functions by introducing features such as messaging, following and browsing, allowing users to communicate with friends, to follow friends, artists, and organisations, and to browse playlists of friends within the platform (Growthhackers). In this way, Spotify included social media features not only with the goal of improving user experiences but more importantly, to enable users to engage with the platform through affordances which are valuable to the platform. These affordance are valuable in the sense that these activities produce significant data what Spotify uses to improve its service for all stakeholders. On March 6 2014, Spotify acquired the cooperation of The Echo Nest, a company that was specialised in big data. For Spotify this was important to improve their personal recommendations systems (Pham). Following on this development, on June 1, 2015, Spotify acquired Seed Scientific, which helped Spotify’s to pursue opportunities using big data (Constine). Spotify’s attempts to enter the big data market, resulted in the evolution of its recommendation services, and finally in the introduction of Discover Weekly which was introduced on July 1, 2015 (Startlin). Discover Weekly is a personal playlist, which is updated every Monday based on users’ listening habits. The discover weekly feature, along with other recommendation features, shows how Spotify used data in order to improve their service which in turn attracted more users. Next to music listening activity and the creation of playlists, Spotify has evolved to enable its users to engage with more affordances what eventually provides them with rich data. This

49 illustrates the tension between what van Dijck calls the “tension between community-based connectedness and commercialized connectivity” (155), since the features made available by Spotify for its users are of value in order to improve user experience, but at the same time these activities are commercialised in order to produce valuable data which can be used to enhance Spotify’s platform and to sell to third parties. Next to this, Spotify’s focus on the big data market provided another aspect in its relationship with record labels, artists, and advertisers, because it enabled Spotify to provide musicians with information about how their fans behave, and advertisers with possibilities for targeted advertising (Vanian). Spotify’s focus on big data also effected in the fact that advertisers were provided with a variety of affordances. Nowadays advertisers are enabled to make use of eight formats, namely a sponsored session, video takeover, audio ad, display ad, overlay ad, homepage (“Spotify for Brands”).

5.2.2 Developers An important aspect of Spotify’s connections with developers was the introduction of APIs. On April 2009, Spotify introduced its first API and created its developer website (ThelinMichael 2009). This API calles ‘libspotify’ allowed users to build own streaming applications on top of Spotify’s platform. On August 2011, they enhanced the libspotify API to allowed Apple developers to build iOS apps that could play any song from Spotify’s database (Thelinmichael 2011). This type of API is an example of what Andreessen calls a level 1 access API (Andreessen n. pag.) Since third party developers were enabled to access Spotify’s functionalities from outside the core system, namely from the apps they developed. This type of API eventually evolved in the web API Spotify uses nowadays. The web API allows all type of programs to access Spotify’s data over the Internet (“Spotify Labs”). Developers can use the web API in order to create search applications, artist explorers and other programs, which are able to gain access to Spotify’s rich database (“Spotify Labs”). In this way, Spotify enabled developers with affordances that produce what Langlois et al. call traffic tags, since the use of APIs enabled interoperability between Spotify and developer

50 applications what led to the fact that Spotify’s functionality got embedded into other platforms and other places on the web. To even further extend access to data, Spotify also provided the Echo Nest API. While the web API gave access to metadata and content that power the Spotify desktop, web, and mobile players, the Echo Nest API gives access to metadata about “artists and songs drawn from leading media companies, and also generated algorithmically, that is used by many of our commercial partners” (“Spotify Echo Nest API”). In the meantime Spotify announced it would migrate both API’s by providing the Spotify API from May 31, 2016 (“Spotify Echo Nest API”). The Echo Nest API illustrates how Spotify has enhanced its APIs around the collection of data. The possible affordances of developers are another example of the way Spotify enables stakeholders to engage in such a way that they produce activities that are commercialised to produce valuable data. The focus on data allows Spotify to enhance the exhibition of network externalities in the sense that the commercialised activity constitutes another aspect on which Spotify stakeholders influence the value amongst each other. Another connection Spotify gains with third parties is through widgets. In this way they allowed third parties to add widgets on web pages and applications, which enable visitors to play track and follow Spotify profiles (“Spotify Widgets”). An example of a recently added widget is Spotify’s integration into Shazam, an app that identifies tracks through audio. This integration allows users to automatically add ‘Shazamed’ songs to personal playlists on Spotify and play full tracks inside Shazam’s interface (“Shazam”) Spotify also used the Apps API which allowed third party apps inside Spotify’s platform (“Spotify Apps API”). This type of API is what Andreessen calls al level 2 Plug-In API (Andreessen n. pag.), because it allowed third party developers to build functions that were possible to integrate in Spotify’s user interface. The Apps API constituted an app ecosystem, which provided advantages for Spotify’s users who were enabled to use apps such as Soundrop, Last.fm, Pitchfork, and Supper in order to help listeners to discover new music and expanding their experiences on Spotify (Summers). The Apps presented within Spotify’s platform was an attractive experience for users who used

51 Spotify’s desktop client. Figure 11 shows how the app were integrated within Spotify’s desktop.

Figure 11 - Spotify's desktop apps. Source: http://www.musicindustryforum.com/spotify-kills-the- app-finder/

By integrating these apps within Spotify’s desktop client, Spotify engaged in an ecosystem with the other apps and platforms I described above by embedding functionalities into Spotify’s platform. However, Spotify closed Spotify apps submissions on March 24 2014 (Pompa). In the official announcement, the following reason that motivated Spotify’s choice was described:

“Partners have been asking us for a cheaper and easier way to own a presence inside Spotify and developers would like more ways to integrate Spotify with their own applications. Pair that with the growing importance of mobile and we realized we needed to adapt. As a result, as of this week we will not be accepting any new submissions for Spotify apps for release in the App Finder” (Pompa).

In this way, it remained unclear why Spotify exactly decided to ‘kill’ third party apps inside their platforms since their explanations offered little insight in their motivations for this action. One could say, Spotify’s focus on mobile constituted a

52 significant change in Spotify’s ecosystem, which led to the fact that older connections made through Spotify’s Apps API became less of value for Spotify and therefore disappeared. What’s most significant is that Spotify threated its developers poorly by shutting down its app API. Third party developers used the Apps API to build services that were based on Spotify’s resources, and by shutting down this API, some services and businesses that were build upon the connection with Spotify’s desktop ceased to exist. Bucher describes this also happened to developers who have build applications on top of Twitter (n. pag.). She describes, Twitter only enabled third party applications if those applications would meet the needs of the platform and since the platform owners decide for themselves when they update of change the API, all developers are at risk that their applications will be erased (Bucher n. pag.). Spotify has proved to handle in a likewise way, since its focus on mobile resulted in the fact that the third party desktop apps were not of enough use anymore for Spotify. The different API’s Spotify has enabled over time, show how Spotify motivates developers to engage in activities that connect functionalities to other applications and other platforms in such a way that valuable data can be gained through the ‘capturing’ of the traffic tags that are created through the interoperability between platforms and other services within the ecosystem. Next to this, the evolution of Spotify’s available APIs shows how the platform sometimes decides to shut down APIs and provide new ones, in order to evolve in such a way that developer affordances become as much value as possible for Spotify.

53 Conclusion The purpose of this thesis was the answering of the following research question: How does the evolution of Spotify’s platform over time, relates to the way Spotify tries to orchestrate its relationships with its most important stakeholders? By analysing the phenomenon of music streaming from a media ecological perspective with a focus on the concept of new materialism, I have shown how developments in the world of digital music constituted important aspects for streaming services to enter in our contemporary society. Therefore, this perspective helped me to further explain how Spotify could attract its most important group of stakeholders (the content providers) in the first place. By analysing Spotify as a multi-sided market with a focus on economic approaches, I have shown how Spotify orchestrates its relationships with its content providers, users, advertisers and developers. These perspectives allowed me to elaborate on the entry phase of Spotify’s platform as a business in a multi-sided market. Next to this, by focusing on expanding strategies and communication strategies towards stakeholders, I have shown how the evolution of Spotify’s platform relates to the way Spotify tries to satisfy its separate stakeholders and how conflicts of interests played a role since some aspects of Spotify’s evolution were motivated by demands of stakeholders. By analysing in what ways the interaction between the separate stakeholders and the platform created value for other stakeholders, I have shown how Spotify is organised in order to create a vicious circle of network externalities, since the stakeholders attract and create value amongst each other in multiple directions. Therefore, the microeconomic approach that is advocated by Rieder and Sire proved to be fruitful in order to analyse the evolution of the platform. Next to this, a focus on the ‘politics of platforms’ allowed me to analyse how the evolution of Spotify’s stakeholders relations is related to the varied ways Spotify communicates towards its stakeholders. In this way, this type of analysis can be useful to extend the analysis of stakeholder relations of platforms from an economic perspective since the focus on communication strategies allowed me to further explain how Spotify’s varied communication strategies are linked to the multiple ways in which the exhibition of network externalities works.

54 By extending my research with software studies approaches it also became clear how Spotify enhanced its platform over time in order to transform activities of developers and users into what van Dijck calls commercialised activities. Those activities produce valuable data for Spotify what can be used to improve platform features, for example with evolving personal recommendation systems, and to create more value amongst stakeholders. In this way, the software studies approaches helped me to explain how the exhibition of network externalities is also influenced by stakeholder activities and that Spotify enhanced it platform to both improve usability and create value for itself in the same time. A focus on affordances proved to be a helpful addition to these approaches since this helped me to understand how types of engagement that are not necessarily linked to the use of APIs also create value, such as the simple user activities of listening to songs and creating playlists. In this way, a combination of economic and software approaches also proved to be fruitful in order to elaborate on evolving stakeholder relations of a music-engineering platform such as Spotify. My aim to develop a historical perspective on Spotify’s platforms by using publicly accessible materials through documentary analysis and the analysis of what Consalvo coined as paratexts, proved to be valuable in order to elaborate on platform orchestration from distance. However, since the main focus of my thesis was build around Spotify’s stakeholder relations, these approaches also had limitations. Since Spotify does not openly discusses deals with content providers and advertisers resulted, some aspect of Spotify’s relations towards those stakeholders are left unexamined. My method did allowed me to understand how connections between stakeholders were coordinated but the exact terms on which Spotify got content providers on board are not fully understood. Therefore, for further research it will be interesting to decide how these approaches can be extended in order to understand more accurately how these stakeholder relations are originated while studying platforms such as Spotify that not publicly share all aspects of business strategies.

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