Finding the product in your platform

Essentially, apart from aggregating and organizing producers and consumers – which is largely a mechanism to organize value chain actors – what is the unique product that the platform is creating which gives it the right to sit at the centre of the ecosystem?

If you think of it, distributors and brokers also aggregate producers and consumers. Yet they don’t command the right to sit at the centre of the ecosystem (except through the control of asymmetric information or relationships).

The ‘product’ creates the difference between a distributor and a platform.

What is a platform uniquely creating in the middle which gives it the right to sit at the center of the ecosystem?

Let’s unpack this with a few examples.

The ‘product’ in Spotify’s platform

What does Spotify really ‘produce’?

You might say that Spotify’s product is the music streaming service. But that’s really just a proprietary distribution technology in a product value chain.

You might argue that the products are the songs. But that’s not what Spotify is really producing. The labels own the songs, the artists create them. The songs are inputs into the ‘production’ process.

What exactly is the ‘product’ in Spotify’s platform?

Spotify’s ‘product’ is the playlist.

Playlists are central to Spotify’s strategy within the music ecosystem.

Songs, which were traditionally bundled into albums, were unbundled by the internet and then went through three phases of

1. free distribution through file-sharing services like Kazaa and Napster,
2. pay-per-tune distribution through iTunes, and
3. fixed-fee unlimited catalog distribution through Spotify.

This unbundled song distribution changed for the first time with Spotify’s playlists.

Playlists provide the locus of rebundling where songs – unbundled from albums and artists – are rebundled into theme-based playlists.

As WIRED points out:

Playlist placements are highly coveted, both for how they rack up the streams and the way they expose music to new listeners.

Indeed, playlists have become so important that being left off can flop even megastar releases (as Katy Perry discovered after Spotify blackballed her for giving rival Apple Music a temporary exclusive, reminiscent of Amazon cutting off publishers who wouldn’t give it big enough discounts).

Playlists are the core product driving discovery of new artists. They are critical for Spotify to gain a right to sit in the middle of the music value chain and not be merely a digital distributor for the top 3 music labels.

What Spotify ‘sells’ to advertisers and brands is influence and targeting through playlists.

1. The “Sponsored Playlist” program allows brands to sponsor a Spotify-curated playlist for 1 week.
2. Using the metadata of playlists, Spotify also launched “Branded Moments,” a program which leverages the real-time insights playlists offer into activities that listeners are engaged in. E.g. a fitness brand targeting a playlist labeled Workout.

The playlist – the central locus of rebundling in the music streaming business – is Spotify’s core product.

Spotify takes songs/tracks as ‘inputs’, rebundles them into playlists as ‘product’, and sends them down its proprietary streaming ‘distribution’ channel.