are the “winners” and who are the “losers” of the rapidly evolving media economy? We can be brief about the winners: a lucky few. A very small percentage of cultural products tends to generate the vast majority of revenue and profit. The consumption of games, music, and movies has always been blockbuster-driven; hits are as much a sociocultural phenomenon as an economic one (Elberse, 2013). Not for nothing are the cultural industries described as a “risky business,” in which nobody can predict long-term trends and tastes (Hesmondhalgh, 2019: 32). The need to withstand losses, or vice versa, to secure access to finance capital to fund big-budget blockbusters, therefore, plays straight into the strengths of transnational media conglomerates (Fitzgerald, 2012; Mirrlees, 2013). At the same time, the value of existing brands, stars, franchises, and fan favorites puts small and medium-sized enterprises and new entrants in a disadvantaged position.
To be fair, so-called “winner-take-all” dynamics and the unequal distribution of resources underlies many – if not all – major industry sectors and societies (Frank & Cook, 1995). We point to these continuities here because two mitigating factors have been widely considered as antidotes to corporate concentration and a blockbuster-driven culture: digitalization and internet connectivity – both of which have been framed as instances of democratization. The accessibility to digital information and tools, legal scholar Yochai Benkler argued in the mid-aughts, has lifted “the central material constraints” associated with “industrial” (i.e., capital-intensive and proprietary) modes of production and distribution of culture, thereby increasing “individual autonomy” (2006: 133). Around the same time that Benkler published his influential monograph, a broad collective of media scholars, consultants, and pundits pointed to the blurring of boundaries between production and consumption, and the purported rise of “co-creation” and increase in “mass creativity.”4 In hindsight, such enthusiasm was understandable – if not myopic.
The cultural and economic power that record labels and news organizations accrued and held for decades was suddenly challenged by individuals who had the ability to easily distribute MP3 files or set up a blog to become citizen journalists. Then again, while such instances of “non-market” production had the potential to radically transform the information economy, and, in so doing, initiate a “substantial redistribution of power and money” (Benkler, 2006: 23), such a future has yet to be realized. As political economist Enrique Bustamante had already predicted: “digital change does not engender a revolution, an abrupt rupture with past history, because the new technologies cannot erase the core nature of the media within modern capitalist society” (2004: 805). While, in the abstract, the costs to create and distribute digital information have fallen drastically, this has not eradicated existing inequalities, such as access to capital, education, and access to internet connectivity (Hargittai & Walejko, 2008; Mansell, 2017). Nor has increased access to the means of production put a dent in the balance sheets of telecoms, consumer electronics, or media conglomerates (Winseck, 2017, 2020).
Indeed, despite all the cheering optimism surrounding “user-generated content,” the basic economics of information production and distribution did not change for legacy organizations, as producing a high-quality “first copy” of a game or song is still costly. Over recent decades, the blockbuster-driven parts of the game industry, for instance, have seen their production budgets increase, rather than decrease (van Dreunen, 2020; Whitson, 2019). Legal frameworks, particularly intellectual property regimes, erected to create artificial scarcity and to protect those significant investments, have not seen a drastic overhaul either (Cohen, 2019).
That being said, what did change is that digitalization and internet connectivity have made the “boundaries of the firm” – to use a turn of phrase popular among business scholars – more porous. Instead of engaging in costly legal battles, structurally acquiring suppliers, or merging with competitors, businesses in a wide variety of sectors decided to provide consumers, suppliers, and competitors with “toolkits for innovation” (von Hippel, 2005). This concept, popularized in the early 2000s by MIT business scholars, is a prescient description of how, a decade later, platform companies provided consumers and third-party companies with the means of cultural creation, distribution, marketing, and monetization. In the next two chapters we discuss how platforms have used these toolkits both to vastly expand their infrastructural boundaries and as a means to govern cultural producers. But first, we examine the main tenets of platform economics.
Platform Economics
Platformization simultaneously entails a continuation of and a break with long-established economic models and strategies. On the one hand, platform companies such as Google and Tencent behave as globally operating tech conglomerates that aim to leverage economies of scope and scale, attract and retain high-quality personnel, and create “sticky” products and services, as well as valuable brands (Barwise & Watkins, 2018). On the other hand, platform companies operate unique business models and have devised novel business strategies (Evans & Schmalensee, 2016; Parker et al., 2016). By doing so, platforms have ushered in a fundamental reorganization of institutional relationships and a subsequent shift in power, which has been theorized along different disciplinary lines.
From the early 2000s onwards, a broad range of scholars situated across the fields of economics, strategic management, marketing, and information systems research contributed to a transactional perspective on platform competition (for comprehensive reviews of this literature see, for example, de Reuver et al., 2018; McIntyre & Srinivasan, 2017; Rietveld & Schilling, 2020). The fact that this broad collective of business scholars is predominantly concerned with platform competition is indicative of their market-oriented politics; this is an epistemology that tends to gloss over power relationships, what kinds of cultural goods are produced, and under what conditions (Mansell & Steinmueller, 2020). To be clear, we are less interested in the efficiency of markets and consumer welfare, and much more concerned with the unequal distribution of economic and infrastructural power, and how platformization impacts democratic norms and values (van Dijck et al., 2018; van Dijck et al., 2019).
Taking these disparate, yet overlapping views into consideration, in the context of this chapter we understand platforms as multisided markets, which we define as aggregators of institutional connections, including economic transactions, that mediate between end-users and content and service providers. Let us unpack this definition by pointing to how platforms give way to, control, and structure markets, and how they generate revenue.
First, platform companies engender so-called “multisided markets” because they make and operate marketplaces that mediate between two or more user groups (Gawer & Cusumano, 2002; Rochet & Tirole, 2003). A platform’s role is to be a “matchmaker” that connects consumers or “end-users,” businesses, governments, nonprofits, and other groups, each representing a separate side in a platform market (Evans & Schmalensee, 2016). A popular case study among economists is the game industry, particularly the dedicated game console: companies such as Nintendo and Sega operate prototypical two-sided markets as they mediate between players and game publishers (Shankar & Bayus, 2003). In this instance, players (i.e., end-users) populate the demand-side, whereas the supply-side is occupied by game publishers. We will refer to those groups not consisting of end-users as institutional actors, which we understand as companies or individual entrepreneurs. Thus, we distinguish between end-users and the producers of cultural content, the latter of whom, as noted in Chapter 1, we consider to be part of a broader group of institutional actors we refer to as complementors.
Second, the platform companies we examine in this book are not mere matchmakers; they also strategically open the boundaries of their firms to stimulate external innovations by complementors (Baldwin & Woodard, 2009; Gawer, 2020). In this respect, platform companies such as Google, Apple, and Facebook differ from “transaction” platforms at the heart of the gig-economy, which Nick Srnicek describes as “lean platforms” (2017: 73). An example of the latter are transportation platforms such as DiDi, Lyft, and Uber, which aggregate drivers and passengers,
