Reaping the Harvest

by Stoker

It’s a bit early yet to be sounding off about long-term behavioural changes brought about by Covid - not that that will stop anybody from doing just that. Your column will though boldly plunge straight in, beginning with the effects of the last truly serious world-wide pandemic: the Great Influenza pandemic (or Spanish Flu, as it is widely but inaccurately called) of 1919-1921.

That pandemic a century ago had far more serious consequences than the Covid one, at least so far. It affected the young much more than the old, for reasons that are not fully understood, and followed the decimation of the male population of Europe in the First World War (again, especially the young). The economic consequences of pandemic and war were, almost immediately and surprisingly, a financial boom as domestic economies started up again and commercial and domestic restocking took place. That was not the only reason for the boom; the devastation of war changed attitudes to investment and saving; there was a fatalistic, short term, and extravagant edge to the 1920’s compared with the years before 1914. The deaths caused by the war and by the influenza reduced the productive working population abruptly, bringing about advances of technology, rising wages, and the arrival of women in many workplaces; and what is often forgotten, a sudden concentration of capital in significantly fewer middle and upper-class ownerships.

Also overlooked was a rapid change in the patterns of business ownership. There was a great boom in the stock markets as many companies, aided, naturally, by those ever-present vultures of finance, the bankers, sought to source investment capital from the widows and orphans who suddenly found themselves wealthy. The 1929 stock market crash perhaps inevitably followed that long boom. The collapse was particularly hard on private investors and on smaller companies. What emerged from the wreckage was the rise of much bigger businesses. In Germany and in Italy in particular that led to another trend: the increasing closeness of large capitalist organisations to government. One great example was Ferdinand Porsche, the design colossus of the German motor car industry, who Hitler saw as the man to lead the motorisation of Germany through the formation of Volkswagen. Even more significant were the steelmakers Krupp, and the chemical company I.G. Farben, whose closeness to the Nazi Party led to very valuable contracts for them – including in weaponry – and financial support for the Nazis.

It was very different in the UK, in France, and particularly in the USA. The USA had seen the rise of over-powerful corporations, the Robber Barons as they were nick-named, toward the end of the nineteenth century, and had passed anti-trust (anti-monopoly) legislation to deal with them; Standard Oil was famously broken up in 1911. US politicians knew the danger of over-powerful capitalism and did not forget it – then.

Which brings us abruptly to Neil Young. Or, at least, the present day. Once again we see the rise of extremely powerful corporations, this time not only reaching for business growth across national boundaries on an extraordinary scale, but also able to avoid both the taxmen and the regulators by clever manipulation of fluid domiciles. These businesses are almost entirely internet-based and the early entrants have built rapidly on their enormous first-starter advantages. How many online shoppers use online general stores other than Amazon, the fastest, cheapest, and to most shoppers, the only one? Where might you source a music catalogue other than via Spotify (we will come back to them)? How indeed would you search, even for this magazine, other than by using Google? There are other search engines, but who uses them?

These businesses, many of them utterly essential (we think) to the way we live now have become powerful way beyond what those Robber Barons ever dreamed of; so are the size of the fortunes that come with them. The average Rockefeller or Vanderbilt was no doubt delighted with his private train and ocean-going steam yacht; but today’s barons ride their own spacecraft and are working on immortality as their next trick.

To many governments they are too powerful; monopolists almost without competition who can hoover up anything that might threaten their market control. Breaking up Standard Oil was easy. After all, one barrel of oil is pretty much like another, competing tankers can move it round the world, refineries can be operated by a multiplicity of owners, and motorists can generally drive to a whole range of petrol stations. Not so much Google; if you need to find something online you want the most comprehensive and fastest search engine available. So too Facebook and Instagram; the anxious socialiser wants to look in just one place – or post their thoughts and history in one space. Get the lead in that and be cost-efficient and reliable, and all the traffic will be yours. So will all the advertising; and you can drive a very hard bargain with the advertisers who have nowhere much else to go.

We must return now to Spotify, which may be about to expose a few flaws in these theories. Founded in 2006 in Sweden, the founders followed all the careful rules of online monopolists. Get in quick and grow very fast and use the best lawyers against potential competitors – or buy them out. The business is now quoted on the NYSE; and until last week was valued at roughly $40bn, though by the time you read this, who knows. The Spotify business began by making music tracks available to consumers; moving quickly so to make it almost impossible for others to set up and compete. (Not quite all, there are a few specialist sites that bring minority music tastes to their own connoisseurs.) They pay the artists tiny amounts (a fraction of a penny) for each track played but the charges to consumers are relatively modest – about £10 a month for unlimited access. Who notices a tenner a month leaving their bank account? Not over four hundred million subscribers. Consumers can even get the service free if they let Spotify choose what they listen to and insert advertisements.

The site sources music and other audio material from around seven million creative types – and from not so creatives; many music copyrights get sold to professional investors. If you want to reach an audience of any size now, you need your material on Spotify. Which is where trouble has begun.

Recent growth has been into areas of other audio appeal, particularly podcasts, a sort of speech radio on demand, and the growth area to be in. Recently Spotify signed up, for a US$100m fee, the daddy of all podcasters, Joe Rogan, a chat show host who is prepared to chat to, and give airtime to, almost anybody. This could be dangerous and Spotify knew this. They imposed some sensible limits on who Joe could chat to and what about. Trouble, when it came – within days, came out of left field: from a bunch of leftish-leaning musicians, most notably Neil Young, formerly of Crosby Stills Nash and Young (not a firm of New York attorneys), who objected to Mr Rogan giving time on air to anti-vaxxers in the Covid debate. Now this is all a bit weird, Mr Young being formerly of anarchistic leanings himself; but, whatever, he threatened to pull all his music off Spotify unless Mr Rogan was sacked, or at least gagged. Neil was followed by a number of other anti-establishment types, all seemingly playing for the establishment and against free speech.

Now Spotify sees the danger. Silence Mr Rogan and they lose a lot of listeners. Be not nice to Mr Young and they lose a lot of highly remunerative artists (though there is a question as to whether Mr Young can take his music off the site as he does not own the copyrights; he sold a 50% interest in his copyrights to an investor only a month ago.) But if the artists start to walk away, maybe figuring good ‘ole fashioned computer discs (CDs) to be a better way of keeping themselves in Chevys and champagne, Spotify may find itself in trouble. Especially if its customer base also figures out that buying a CD a month is better than paying monthly music rentals; at least you own the damn disc if you can’t make the monthly payments.

This may turn out to be all about nothing; but it could just be a tune which will not play much longer, and a warning that consumer power can be more effective than government regulation.