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 4 and 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.
Becoming a Complementor
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
