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Is Digital Payola Involved in Music Discovery and Recommendation?

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By Taylor Lambert and Kevin Erickson for Future of Music Coalition.

In the age of on-demand streaming, it’s common to hear people talk about music as “limitless”— something that flows forth endlessly like water. Indeed, musicians around the world release a huge volume of new music every day. But in practice, most consumers’ exposure to the world of new music is extremely limited. It’s one of the thorniest problems—if there’s so much music out there, why do consumers end up being exposed to so little of it? Why should the music marketplace be a winner-take-all system?

Of course, whether or not you view this as a problem to be solved could depend on whether you’re fortunate enough to be one of the “winners.” Still, media critics have long pointed to the role of gatekeepers who exercise considerable control what music reaches audiences. From radio programmers to retail managers to talent buyers to music reviewers and beyond, the most powerful labels do their best to keep their offerings front and center—often at the expense of independents. Radio is the still the number one source of “music discovery,” but commercial AM/FM radio broadcasters in this era of ownership consolidation tend to be highly risk-averse in their programming choices. Playlists are narrow and repetitive, as our research has documented. It has been the strong hope of the independent sector that online music services would be more democratic, allowing more artists to find audiences than was possible in the old-school media world.

Indeed, for many artists this certainly has been the case. It’s easy to find success stories where musicians made an impact outside of traditional gatekeepers influence. But what’s harder to see are the limitations of online music discovery, and the ways that the same powerful industry players dominate the space, replicating some of the very bottlenecks found offline. Even the counternarratives tend to be more complex than many imagine.

Remember that to bring any on-demand or download service to the masses, services must make deals with rightsholders. Typically, the major labels have incredible leverage in setting the terms of these deals. That’s because they’re able to use the presence or absence of their massive back catalog for leverage. Due to non-disclosure agreements, we rarely—if ever—get to see the terms of these deals, but it’s fair to say they likely give the big guys better tools to drive listeners to their music. (Note that services like Bandcamp and Soundcloud that don’t aim to have complete catalog are exempt from this dynamic, as are noninteractive services governed by statutory licenses that allow them to perform full catalog.)

In this context, how free are consumers to discover their own taste preferences? Consumers have no way of knowing whether recommendations and curated playlists are based on curatorial choices, or whether big money tips the scales. Practices and policies vary, but when you see an artist featured in a splash ad on your favorite service’s homepage or a “personalized recommendation,” it may be bought and paid for by a big label or offered as a pot-sweetener. And this could be true even if you’re a subscriber paying for an advertising-free experience.

Part of this ambiguity stems from a lack of oversight. The Communications Act requires that broadcasters must disclose “if matter has been aired in exchange for money, services or other valuable consideration,” making undisclosed payola illegal on AM/FM radio. But when it comes to online services, regulatory agencies such as the Federal Communications Commission have no jurisdiction. Meanwhile, the Federal Trade Commission regulates advertising practices, but has very limited say over most of what goes on in a retail environment.

It’s important to understand that this dynamic isn’t new. Historically, in physical retail environments, large window displays and primo shelf space is afforded to releases where a label or distributor made financial arrangements with the retailer, not just because the staff of Sam Goody decided that they really liked Stone Temple Pilots.  

But music services often encourage us to think of ourselves as the architects of our own online experiences. When making our playlists, to what extent do digital services really take our preferences into account vs. the preferences of advertisers?

When Spotify unveiled released its “Spotlight” feature last year, many commenters noted that it was an attempt to demonstrate the service’s role in breaking artists.  At the time Billboard wrote: “Spotify is using Spotlight to kill two birds with one stone. One is discovery. [Spotify’s head of content Steve] Savoca says the company wants to be seen as a place for discovering new music…. And there’s the industry relations aspect, too. Savoca says Spotify has ‘wanted to make a clear proposition on value for quite a while.’ Throwing its weight behind a small number of artists may demonstrate the company’s ability to influence careers.”

Far fewer noticed that all the artists involved were associated with major label Universal Music Group (hat tip to Jody Griffin from Public Knowledge, who first brought this to our attention). There’s no way to know what deals are involved, but at the very least it stands to reason that the service could be building an evidence case to charge labels for this kind of promotional support in the future. Universal is likely to be happy with the results, as they saw a 75 percent jump in streaming revenue last year, outpacing industry averages. 

Now that the latest Spotify “Spotlight” round has been announced, we see a slate of up and coming artists who will benefit from extra Spotify promotional muscle. For whatever reason, at least 7 of the 16 acts are signed to Universal Music Group subsidiaries.

Perhaps you find these recommendations easy to ignore. But just as the ratio of “organic” content to advertiser-driven content delivered on Facebook has shifted over time, it’s easy to imagine some digital music services could move further in this direction. Will indie artists be able to cut through the noise? Will indie labels be able to afford to compete if digital payola becomes the new standard?

Solutions aren’t easy to come by. We’re aren’t inclined to support top-down mandates, but it does seem fair to ask that digital music services be held to the same level of transparency and disclosure as AM/FM radio. At the very least, services should recognize that a recommendation engine and user interface untainted by paid placement might be something to brag about.


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This story appears courtesy of HypeBot.
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