In my homework assignment article I explore two online music platforms: Apple’s iTunes Music Store and Spotify. They both face problems with one side of their user group. My purpose is to show that two-sided platforms rely on mutual attraction. If one user group doesn’t like the service provided and leaves, the platform could face a walk out of the other group as well.
Problem with listeners
Apple-users don’t like the look & feel of the iTunes Music Store anymore. It looks like a spreadsheet instead of giving the thrill of buying something. Apple also missed out on the trend of streaming music. The company clung too long to its concept of download-to-own. In my view Apple can simply not afford to let slip the user group of listeners, since there is a close tie between the service of Apple’s online music platform and the sales of its devices (iPod, iPad and iPhone). If music lovers definitely turn their back on the iTunes Music Store this step will automatically lead to the decline in sales of Apple devices.
Problem with musicians
Spotify was confronted with the first band, Atoms for Peace, to pull their music from the platform, because in their opinion the returns are too poor. It is not clear how many artist have followed this example, but it is clear Spotify cannot ignore this sign. Music lovers seeing their favorite bands leave a platform, might decide to follow, causing the total collapse of the platform. “The value of a platform depends on the value on the number of users on the other side,” according to the article in Harvard Business Review I used for reference and theoretical background.
New competitor
In 2014 both platforms might have to deal with a new competitor as Pono will be launched by legendary artist Neil Young. Pono is an online music platform that ‘will save the sound of music’ according to Young. That will make both musicians and fervent music lovers happy, who might decide to switch to this new platform. Being a late mover Young can avoid all the mistakes early movers made.
Conclusion:
Two-sided platforms are based on the mutual attraction of user group. They do however not run themselves. Managing a platform means having a keen eye for the various needs of both user groups. If one group is not happy with the provided service and decides to leave, the platform becomes unattractive for the group on the other side. This group could also decide to move elsewhere, leaving the two-sided platform a no-sided platform.
Find out more about Pono:
http://www.rollingstone.com/music/news/neil-young-expands-pono-digital-to-analog-music-service-20120927?print=true
Interview Neil Young at David Letterman: http://www.youtube.com/watch?v=qL1ffo8TwGM
