Thomas Poell - Platforms and Cultural Production

Despite the complexity of the platform economy, millions of cultural producers decide to get on board, thereby making themselves platform-dependent. Economic asymmetries represent both a deterrent and a potential economic opportunity. What sets the platform markets in the cultural sector apart from the “lean” or “transaction” platforms in the physical realm – such as transportation or housing platforms – is the virtually uncapped revenue potential of the former. As noted in Chapter 1, information goods in their digital form are nonrival, meaning that one person consuming them does not prevent others from doing the same. Add to that the low marginal costs for digital distribution, which are close to zero in digital markets. Once a cultural producer has a digital copy of an app, revenue is only limited by demand. Compare this to an Uber driver, whose revenue potential is limited by hours worked.

The cultural industries’ star system is another driver of unequal distribution of revenue: “The winner-take-all effect is especially strong in entertainment markets because performances of the most sought-after creative talent can be reproduced at low additional costs” (Elberse, 2013: 90). While tens of millions of end-users flock to TikTok star Charli D’Amelio or Douyin star Chen He, an Uber driver may very well have a five-star rating, but this will not translate into millions in potential earnings.

The revenue potential of platform markets has only increased with their continued global diffusion. Historically, producers of physical cultural goods confronted obstacles when trying to enter foreign markets; the costs for small entrepreneurs and new entrants were especially significant. Without a doubt, platforms have increased market access and thus the scale of economic opportunity. At the same time, platforms have lowered costs for a great many forms of cultural creation and distribution.

The costs of cultural creation – shooting a video, recording a song, or taking a high-quality photo – have fallen drastically (Benkler, 2006; Shirky, 2008). Meanwhile, in the realm of news production, the tools required to engage in journalistic work, “such as access to press releases, newswire services and archives, interviews with experts, and other research tools,” which are “now widely available to anyone with Internet access,” allow freelance journalists to work outside the traditional bounds of journalistic institutions (Cohen, 2016: 85). Platform operators, for their part, have allowed for either seamless integration with existing (digital) tools and software formats, made platform-dependent production software available for a nominal fee, or integrated production tools straight into the platform itself. The latter category – the vertical integration of toolsets – constitute the beating heart of newly emerging platform practices. They allow users to forgo extensive training or acquire additional software.

Next to lowering creation costs, platforms have put downward pressure on distribution costs as well. Platforms such as Spotify and Twitch have no distribution fees for for-profit developers. Developers of social games, such as Zynga, do not have to compensate Facebook to host content on their servers. Creators in the social media industries have never received a hosting bill either. It may sound somewhat obvious, but this marks a major departure from just a decade ago. In legacy markets, such as music and journalism, the costs for physical distribution were – and still can be – staggering. These costs not only include exhibition (i.e., transportation of newspapers, books, and discs), but also the costs of coordinating distribution, which brings us to another important reason why joining a platform can be so tempting for complementors.

Digital platforms have drastically reduced economic friction by cutting down on transaction costs – that is, the costs incurred in doing business (Gawer, 2020; Parker et al., 2016). For end-users, engaging in economic transactions is relatively seamless. For complementors, getting paid by platform companies can be difficult, but, in the aggregate, transaction costs are lower compared to physical markets. In theory, at least, the rules on payments are uniform and clear. For example, Apple’s payments to app developers “are made no later than thirty (30) days following the end of each monthly period.” 9This may sound like a trivial detail, but as any entrepreneur can attest, getting paid on time and not having to retain lawyers to chase after delinquent corporate partners saves a lot of time, money, and angst. In practice, meanwhile, complementors have accused platform companies of uneven systems of payment and, worse, surreptitious practices that unfairly punish creators (Duffy, Pinch, et al., 2021).

In addition to allowing cultural producers to save on creation, distribution, and transaction costs, platform companies provide them with access to a bigger and more heterogenous groups of end-users. Facebook, for instance, is available in more than 100 languages. Apple, WeChat, Alibaba, and Line cater to large regional and national audiences (Jia & Winseck, 2018; Mohan & Punathambekar, 2019; Steinberg, 2019). For producers vying to attract regionally diverse audiences, such reach has had profound effects. While the headquarters of the most powerful platform companies are located in just a few countries (i.e., the US, China, and Japan), complementors are much more geographically dispersed. YouTube’s content, for instance, is “largely born global”; as a result, content creators on these platforms are said to be “more racially plural, multicultural, and gender diverse by far than mainstream screen media” (Cunningham & Craig, 2019: 49, 11). A similar increase in geographical diversity can be seen in the book, music, and game industries. Cultural or language-based affinities play an important role here. In India, for example, creators who speak Bengali and Marathi – two of the 121+ languages spoken in India – use streaming platforms to their advantage by creating “demand for regional content from the local and global Indian diaspora” (Mehta, 2020: 117).

For cultural producers, the trade-off for economic opportunity is often conformity. To enter into a platform market and engage in economic transactions, complementors have to align their business models and work with the economic framework set out by platform operators. Even though such frameworks can be changed at whim, a platform’s business model is a highly formalized arrangement of economic technologies and standards meant to engender trust among complementors. This ensures that markets are transparent and economic friction is reduced. Pricing standards are just one example of how platforms formalize transactions. For example, app developers selling paid apps via Apple’s app store cannot engage in dynamic pricing because they are not allowed to pick any random price tag they want, nor can they set different prices for individual users. Instead, they have to pick from price points pre-set by Apple.

While advertising is one of the most visible monetization options driving platform markets, there is a plethora of other revenue streams, such as subscriptions, microtransactions, and donations. The Apple app store, for instance, lists five business models to choose from: paid (a set, up-front payment), free (i.e., advertising), freemium (optional in-app purchases), subscription (recurring revenues), and paymium (a mix of the paid and freemium model). 10Then there are platforms that do not provide complementors with direct means of monetizing their content (Stoldt et al., 2019). Social networks such as WhatsApp, Instagram, and Twitter welcome complementors to establish a presence on their platform, but provide no direct sources of revenue. The unspoken agreement between these platforms and its users – both end-users and complementors – is that these platform subsidiaries serve as a way to garner visibility and steer attention their way. Instagram influencers are able to generate considerable income by posting sponsored content paid for by brands, but Facebook itself does not pay directly for posts. For this reason, Facebook has become a major headache for traditional institutions, especially news organizations (Myllylahti, 2018).