The lessons of Spotify; The festival bundle; Rip-off prices v In Rainbows; PR agency staffer as coal miner; The Napster Analogy; Herbivores v Carnivores; Price innovation and consumption analytics;
Overthinking the sports business, for money
The lessons of Spotify
Sometimes you have a conversation that you just want to share straight away.
Yesterday was one of those days.
The guest is Will Page, former head economist at Spotify and author of the brilliant Tarzan Economics.
We’ll put the podcast out tomorrow.
The Napster Analogy
The topic was one of my favourites: to what extent does the experience of the music industry apply to sport.
Why thus far, has sport avoided its own Napster moment?
Is there something inherently different about the demand for sport, or the structure of the rights market, that protects sport from the sort of value collapse experienced in recorded music, news or porn?
Or is that just complacency, and it’s more a question of when not if.
In which case, where does the Spotify case study best fit in to the sports landscape?
What are the lessons for those running sport’s teams, leagues and tournaments in 2023?
Like music, sport is selling two products - the live event and the media file.
The impact of Spotify on recorded music - the media file - is where attention is usually focused.
But it’s impact on the live event is an under played part of the analogy.
It’s easy to see parallels.
See following chart. Summary: The big get bigger, the middle market is collapsing.
The rise of festivals is worthy of consideration:
They are a form of bundling.
They aren’t about music. They are about experience, aka sex, drugs and rock n’ roll, probably in that order. To nick Matt Locke’s phrase, music/sport is the thing we stand next to, together.
The really hard problems are relevance and discoverability.
I have very little faith that these problems will be solved by private equity, sovereign wealth and a collection of assorted billionaires. They just want the cream off the top; I doubt they’re up for the unglamorous grunt work of fundamental change.
Herbivores and Carnivores
A framing used by Will Page to illustrate the competitive tension in the music subscription streaming market.
There’s a growth phase when there’s plenty of capacity in the market - new customers signing up to a range of music, film, entertainment services.
There comes a time when the strategy changes, herbivore to carnivore, where everyone starts eating everyone else, aka taking customers from your competitors.
Mobile telcos and banks are carnivores.
Music has been a herbivore but in certain territories, in certain verticals, they’ve started eating each other.
Where is sport in this analogy?
The absence of price innovation is a sign of complacency
Elite sport is a rip off.
We all know this to be true.
Absurdly high ticket prices have been normalised; food and beverage concessions are off the scale expensive.
Full stadia can be used to mask this fact, but longer term the decision to premiumise (not a word) the sporting experience has consequences.
It’s a reap what you sow thing.
The Big Eventer is not a sports fan.
They are fans of the experience.
In carnivore mode, the quality of the experience becomes the point of competition between rival sports rights holders, which is an expensive game beyond the balance sheet of those not funded by irrational money.
Who’s Radiohead in the sport to music comparison?
As piracy was running rife, Radiohead put In Rainbows out for free, with a tip jar asking people to pay what they want.
Some counterintuitive things happened.
They made lots of money.
Which sport should do this?
See also: The Atlanta Falcons case study (from Tarzan Economics).
See also: When did fitness become a luxury item?
Some Will Page references to read alongside the pod.
This chart from The Economist on the age of festival headliners
New Year New Ideas, key chart showing the growth of stadiums and festivals below - think Big Eventer)Â
Billboard:Â Examining Covid's Impact on UK's live and recorded industries
Music Business Worldwide:Â Live Music Goes From Suffering to Recovering
IQ Magazine:Â Economist Will Page on Live Music's ResurgenceÂ
Financial Times:Â Roar of the live music crowd drowns out stadium income from sportÂ
AI will make discoverability harder.
We’re in the end of the beginning phase of AI.
We’ve all had a go on ChatGPT and been wowed/scared.
What comes next is a wave of AI executions large and small.
Written content is the first rung.
Recent history is a useful guide to what comes next.
In terms of discoverability, Google’s algorithm rewards movement - defined as regularly updated content - over static websites, video over text.
To make more money, PR agencies began redefining themselves as content publishers, using words like storytelling.
Rather than sell client stories in to gatekeeper media, agencies and rights holders became in-house entertainment hubs; media platforms; 24/7 merchants.
Cue a sea of tedious, undifferentiated branded shit buoyed by made up reach metrics.
Enter ChatGPT.
The accountants are already asking why have we got a shit-generation (shit-gen) team when the robot can do it quicker and cheaper?
The next stage will see the interaction become human-less, with AI bots trying to please discovery algorithms.
Sounds fun.
Alternatively, a more hopeful view: AI can’t kill anything worth preserving.
Bundle, Unbundle
That Yannick Ramcke off The Bundle in written form.
See also:
Manager-led v Owner-led?
From the UP Chat, Ricardo Fort on why Red Bull Media House is an outlier not a proof of concept.
Shaun Whatling v Byron Sharp
Is the most influential thinker in marketing wrong about sponsorship?