Downstreaming

Abstract

Spotify and its competitors all offer the same product at the same price. Why?

Scholars have argued that relationships can be designed in a way that naturally promotes innovation. By “braiding” certain formal contracting practices with informal enforcement norms, parties develop a frame-work that supports trust and positive, long-term collaboration.

This Article takes on this consensus and shows that not all braiding is good. Using the multibillion-dollar subscription music streaming business as an illustration, it demonstrates just how industry forces can, and do, overcome braiding’s positive slant. In that industry, the major record labels (Universal, Warner, and Sony) weaponize braiding to control their downstream distributors: Spotify and the Big Tech companies. Parallel contracting practices are interwoven with informal industry norms that, taken together, create a homogenous market and prohibit startup entry. Innovation is stifled as a result.

Policymakers frequently look to copyright and antitrust law to promote consumer choice in content industries, and there are some viable choices in those arenas. But this Article also sets out other valuable tools that can solve these sorts of issues, disincentivize parallel practices, increase choice for consumers, and encourage market entry by technology startups.

Keywords: contracts, music, technology, copyright, startups, antitrust