Abstract

While large digital platforms have attracted concern for possible exercise of power against consumers and small suppliers, they may have different effects when downstream from concentrated ``major label'' suppliers. Digital platforms can carry many suppliers' products, test the products' consumer appeal, and choose which products to promote, potentially shifting power from the suppliers to the platforms.   We study Spotify's exercise of power via the use of playlists, utilities for testing and promoting music to consumers, using data covering 2017-2020. Our main contribution is to document how Spotify used their expanded playlist capacity to test -- and discover -- proportionately more independent songs to promote on their playlists. We also show that, at least relative to major--label playlists, Spotify-operated playlists promoted new independent songs more than was indicated by their subsequent success. Because placement on Spotify new-music playlists has a large causal impact on streams, these mechanisms explain a shrinking share of royalty payments to major-label suppliers.

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