Thomas Poell - Platforms and Cultural Production

To maintain growth by attracting new users to all sides, major platform companies have morphed into parent or holding organizations that operate different platform subsidiaries . For example, YouTube is a subsidiary of Google, which is a subsidiary of Alphabet Incorporated. Google also operates other platform subsidiaries, such as Google Search and the Google Play Store. While Google is colloquially referred to as a platform, its ever-expanding collection of platform subsidiaries all operate different business models. YouTube’s advertising-driven business model is not the same as the main revenue source of its app store, Google Play, which derives revenue from a mix of advertising and transaction fees. Similarly, Facebook’s apps, particularly those they acquired (Instagram and WhatsApp), can be seen as subsidiaries, since each functions as a multisided market in its own right. One way to make analytical sense of how platform companies are structured is thus to see them as platform ecosystems (van Dijck et al., 2018). Returning to the role of platform evolution, these instances of market integration are relevant to complementors because the growth of each subsidiary solidifies a platform company’s control over its wider ecosystem.

As millions of cultural producers from across industries and regions flock to platforms, questions emerge about the political economic implications of this influx. How do the economic characteristics and institutional relationships specific to platform markets – network effects, pricing, platform evolution, and ecosystems – impact the ability of cultural producers to create, distribute, market, and monetize content? Do platforms challenge or exacerbate existing economic inequalities already present in the cultural industries? To start with this last question, we are inclined to offer a less optimistic perspective. In platform economies, the distributions of value and resources are highly uneven. Network effects alone generate “a cycle whereby more users beget more users, which leads to platforms having a natural tendency towards monopolization” (Srnicek, 2017: 45). In the case of platform competition, if a winner emerges, it tends to become dominant (Barwise & Watkins, 2018).

Consider our retelling of Zynga’s corporate history, which points to the familiar political economic dynamic of the accumulation of economic power on the part of a single entity – in this case, Facebook. The launch of any new platform represents a crucial moment for cultural producers. After all, it is during this pivotal juncture that platform operators may offer complementors incentives to get on board, similar to Facebook offering Zynga special access to its end-users and their data. At the same time, with each additional end-user that joins Facebook, the platform becomes more powerful: “Due to network effects and economies of scale and scope, platforms can achieve a level of user participation that consolidates their position in the market, further increasing their capacities for datafication” (Mansell & Steinmueller, 2020: 39). We have seen what this meant for Zynga. After reaching a tipping point in revenue and end-users, Facebook decided that it was no longer dependent on individual complementors developing social games.

Thus, the early promise that platformization breaks the cycle of corporate concentration needs to be questioned from an economic perspective. Business scholars have recognized this trend and designated platform markets as “winner-take-all” (Constantinides et al., 2018; Schilling, 2002). Because platforms are aggregators of transactions and connections, there is a limit to how many platform companies can be economically viable at any one time. This can be partially explained because end-users and complementors face costs if they want to be active on different platforms. Another reason that advances concentration is the data-driven nature of platform companies such as Facebook and Google. They invest heavily in data storage, analytics, and machine learning, which gives them an almost insurmountable lead compared to platforms that seek to displace them (Mansell & Steinmueller, 2020). The historical data alone gathered by legacy platforms is hard to acquire, let alone replicate.

These observations have enormous political economic consequences and have resulted in antitrust inquiries across the globe. Considering platform-dependent cultural production, winner-take-all effects also apply to complementors. That is, direct network effects and economics of scale are leveraged by both platform companies and complementors. Recall the logic of positive network effects in cultural markets: the more end-users there are listening to a song, watching a stream, or using an app, the more valuable these cultural commodities become to others. These effects are one of the root causes of market concentration. Consider the controversial social media creator PewDiePie. Over the years, the popular YouTuber has been quite savvy in leveraging the platform’s community features that allow end-users to rate, share, and comment on his clips. Throughout 2019, in his race toward attracting 100 million subscribers to his channel, he urged his fans to encourage others to subscribe as well. PewDiePie may not be the best or funniest YouTuber out there, but this is of little relevance once network effects kick in. Serving as an example of the “popularity principle” (van Dijck, 2013: 13), by leading in the charts, he will be recommended more, end-users will talk more about him, and so on and so forth. This example demonstrates how complementors are poised to take advantage of a platform’s winner-take-all dynamics. While understandable, they are, after all, profit-driven industry actors; their growth crowds out alternatives in such a saturated marketplace for attention.

Although relatively open boundaries make platforms economically accessible, such accessibility does not necessarily entail a democratization of the cultural industries. To the contrary, platform-dependent cultural production is riddled with economic inequalities and asymmetries. This is confirmed by financial analyses of the music industry (Aguiar & Waldfogel, 2018; Ordanini & Nunes, 2016), the app ecosystem (Bresnahan et al., 2014; Nieborg, Young, Joseph, 2020), and the impact of recommender systems on sales diversity (Fleder & Hosanagar, 2009) – all of which suggest a strong bias toward popularity. Recent research on the distribution of attention on YouTube paints a similar picture. In terms of “channels, uploads and views,” there is a sharp contrast among YouTube’s 18 different predefined categories, with a vast majority of viewers flocking to a very small percentage of channels in each category (Bärtl, 2018; see also Rieder et al., 2020). Because the supply of content on platforms such as YouTube is virtually limitless, it is easy to overlook the highly concentrated nature of demand. Similarly, while individually we may consume a broader and more diverse set of offerings, in the aggregate, diversity decreases as we collectively flock to fewer – yet bigger – stars, hits, and bestsellers. As such, the political economy of multisided markets appears to inherently frustrate economic sustainability and cultural diversity. The distribution of transactions in platform markets is highly skewed as a very small percentage of complementors is responsible for capturing the majority of downloads, views, likes, revenue, and, ultimately, profit. Moreover, even though platforms have the ability to increase cultural diversity by steering attention to underrepresented voices, they often chose not to do so in favor of a more select group of hits (Rietveld et al., 2020). We will return to these issues in Chapters 4and 5.

How, then, does all this impact cultural producers? How do producers strategically navigate platform markets? Somewhat surprisingly, the economic circumstances of individual complementors and specific industry segments remain underexplored territory for mainstream economists and media scholars. So, let us shift focus and turn to the question of why complementors are drawn to platforms in the first place.