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Limits of the Platform Economy. Digitalization and Marketization In WORKING PAPER FORSCHUNGSFÖRDERUNG Number 154, August 2019 Limits of the Platform Economy Digitalization and Marketization in Live Music Dario Azzellini, Ian Greer and Charles Umney © 2019 by Hans-Böckler-Stiftung Hans-Böckler-Straße 39, 40476 Düsseldorf www.boeckler.de “Limits of the Platform Economy” by Dario Azzellini, Ian Greer and Charles Umney is licensed under Creative Commons Attribution 4.0 (BY). Provided that the author's name is acknowledged, this license permits the editing, reproduction and distribution of the material in any format or medium for any purpose, including commercial use. The complete li- cense text can be found here: https://creativecommons.org/licenses/by/4.0/legalcode The terms of the Creative Commons License apply to original material only. The use of material from other sources, such as graphs, tables, photographs and texts, may require further permission from the rights holder. ISSN 2509-2359 AZZELLINI/GREER/UMNEY: LIMITS OF THE PLATFORM ECONOMY | 3 Contents Abstract .................................................................................................. 4 Introduction ............................................................................................ 5 The digitalization of market intermediaries ......................................... 6 Digitalized intermediaries in live music ............................................... 8 Methods ............................................................................................... 12 How have live music intermediaries digitalized themselves? ................ 18 Why don’t platforms dominate? ............................................................ 24 Assessments of value are mainly qualitative .................................... 24 The task is complex and contingent ................................................. 26 The organizational field is fragmented ............................................. 27 What are the consequences of digitalization for transactions? ............. 30 Digitalization leads to a client-facing business model that shifts risks onto musicians ........................................................................ 30 Intensification of price competition ................................................... 32 Covert forms of profiteering by intermediaries .................................. 34 Conclusions.......................................................................................... 36 References ........................................................................................... 39 Authors ................................................................................................. 44 AZZELLINI/GREER/UMNEY: LIMITS OF THE PLATFORM ECONOMY | 4 Abstract Online platforms have disrupted parts of the capitalist economy, with al- legedly severe consequences in the world of work. It is difficult to assess the potential magnitude of this effect, however, because little is known about the conditions under which platforms take over any given market, industry or occupation. This study examines live music in Germany and the UK, where online platforms do not dominate, despite considerable digitalization of market intermediaries. We argue that the live music mar- ket frustrates online platforms because (1) assessments of value are qualitative; (2) the task is complex and contingent; and (3) the organiza- tional field is fragmented. Digitalization has varying effects on the organ- ization of work and exchange relationships between musicians, interme- diaries and clients. We find that, as the degree of digitalization increas- es, matching services tend to work less as a workers’ representative – which is traditionally the case for live music agents – and more as a force of marketization that disciplines workers by orchestrating price- based competition. AZZELLINI/GREER/UMNEY: LIMITS OF THE PLATFORM ECONOMY | 5 Introduction A rapidly expanding social science literature is examining how digital online platforms are changing capitalist exchange and production in a way that disrupts industries, occupations and the employment relation- ship itself. By quickly matching buyers and sellers (Van Est and Kool, 2015), digital market intermediaries are allegedly driving the expansion of the ‘gig economy’ by encouraging outsourcing (Aloisi, 2018), the lib- eralization of employment relations (Forde et al., 2017; Nerinckx, 2016), and the casualization of employment (Fleming, 2017), especially in per- sonal and professional services (De Groen and Maselli, 2016; Degryse, 2016). Well-known examples include Uber, Lyft, Taskrabbit, MTurk, Ebay, Airibnb, and Deliveroo. How widespread has this disruption been? Huws et al. (2016), find that 16 % of European workers have used platforms, but very few have pursued platform work full-time. Krueger and Katz (2017) find that only 0.5 % of American workers identify customers through an online inter- mediary. Wallenstein et al. (2019) find a worker survey that between 1 % and 4 % of workers in the US, Japan, and six European countries see platform-based gig work as their primary source of income. Platform capitalism has thus developed within limits, but little is known about what those limits are. This paper considers the conditions under which platforms might fail to take over a market. We examine the freelance segment of live music, where workers have long depended on one-off gigs, but where online platforms have not taken over. This finding surprised us, since early large platforms were created to facilitate communication between bands and their fans (Myspace) and to share music recordings (Napster). In- deed, arts and entertainment have been identified as likely areas of ex- pansion for the platform economy (PwC, 2015), and many websites we study self-identify as platforms, even if their functionality does not reflect this. Below we discuss the literature on the emergence and consequences of platforms as market intermediaries. Then we discuss our dataset of interviews and a systematic review of more than 160 websites in Ger- many and the UK, presenting our answers to three research questions. In what ways have intermediaries in live music become digitalized? Why has digitalization not enabled online platforms to dominate live music markets? What are the consequences of digitalization for transactions between musicians and customers? We conclude by discussing the im- plications of our findings for improving exchange and work through worker organization and public regulation. AZZELLINI/GREER/UMNEY: LIMITS OF THE PLATFORM ECONOMY | 6 The digitalization of market intermediaries Digital platforms are increasingly the central figure in a metanarrative of a shift in capitalism in which casualization, flexibilization, automation, and marketization converge, often in utopian or dystopian ways. Before we turn to our material, we deal with three questions in the platforms lit- erature. How should a platform be defined? What are the conditions un- der which platforms might take over a market? And what are the likely consequences for workers? Scholars define online digital platforms in diverse ways. To econo- mists they are strange hybrids: firms that can take over and become the market, simultaneously serving as intermediary and employer (European Commission, 2016; Eurofound, 2018). Compared to other markets, they are relatively open, and sometimes create a direct connection between buyer and seller similar to newspaper want ads and the electronic equivalents eBay and Craigslist. Unlike simple matching websites, how- ever, platforms muster vast quantities of data that they gather through facilitating and monitoring transactions; these data are used via algo- rithms to govern the market, e.g. through rule enforcement and infor- mation provision (Drahakoupil and Fabo, 2017). Buyers and sellers ac- tively provide information by managing their profiles, rather than receiv- ing passively job offers or requests (Langley and Leyshon, 2017). More- over, key aspects of transactions are conducted ‘on platform’, including searching but also payment (Farrell and Grieg, 2016). Platforms tend to act as monopolists where they establish themselves, since they are of- ten subject to network effects, in which their usefulness is directly related to their dominance of a market segment, and since the marginal cost of scaling up is low. The latter are important pieces of evidence cited for claims that platforms are increasingly dominant in contemporary capital- ism (Moazed and Johnson, 2016; Srnicek, 2017). The cases we exam- ine below sometimes self-identify as platforms but in reality adopt a hy- bridised model. They often act as large open online forums for facilitating buyer-seller transactions and offer cumulative data such as pricing and user-generated ratings, but they fall short of this definition of a platform in various respects, as we will show. Under what conditions do platforms achieve dominance in a market? The conventional story found in the sources above goes as follows. An increase in the power of computers created the technological precondi- tions. The economic recovery after 2010 created massive amounts of capital available to fund technology startups. Entrepreneurs saw an op- portunity to address customer dissatisfaction with existing markets – due to low quality and high costs – and to find new ways to extract profits. AZZELLINI/GREER/UMNEY: LIMITS OF THE PLATFORM ECONOMY | 7 This creates a narrative of generalized platform expansion without shed- ding much light on why platforms
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