(Preview) Spotify Spreads Its Wings, CapEx Explosions and Distinctions, Q&A on Viral AI Tweets, Anthropic, Giannis

Ben and Andrew react to a killer round of earnings for Spotify and Daniel Ek’s final earnings call, including thoughts on Spotify’s transformation of the music industry, how a record company oligopoly helped create the definitive tech bundle, and why Spotify’s personalization requires an addendum to aggregation theory. From there: The difference between AI spending at Google and Amazon, why the AI buildout should be funded by debt, un-optimized tech companies, and the logic and risks of Amazon’s AI future. At the end: Reactions to a viral essay on AI job loss, a note about the Princeton Law Review, an ad man strikes back after Ben’s Anthropic criticism, and thoughts on Giannis’ investment in Kalshi.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Andrew Sharp?

  Hello and welcome to a free preview of Sharp Tech.

• 0:08Andrew Sharp?

  Hello and welcome back to another episode of Sharp Tech. I'm Andrew Sharp and on the other line, Ben Thompson. Ben, how you doing?

• 0:20Ben Thompson?

  I'm feeling self-satisfied.

• 0:21Andrew Sharp?

  How so?

• 0:22Ben Thompson?

  Well, we just sat down, you're talking about you have this new external monitor to use for podcasting right in front of you, camera. You're, and you're just like, you were so right. And I'm like, yes, I'm, you know.

• 0:34Andrew Sharp?

  This is what kills me, honestly. I fought you for two and a half years about getting an external monitor, a big studio display Mac that's sitting here on my desk. And you offered, as soon as I took over at Strategories, took over this podcast, you were like, let me get you a monitor. I said, no, no, no, I don't need it. What I found over the course of hosting this podcast is that the tech guys are usually right in the end, and it really pisses me off time and time again. But here we are, you're coming through in crystal clear resolution and I love.

• 1:08Ben Thompson?

  You're looking right at me because the monitor's behind the camera where it should be. It's, it's amazing.

• 1:14Andrew Sharp?

  I gotta say though, I feel a little bit inferior as a host because I don't have a cheeky pint to offer you as we record for the next 90 minutes, not even a pint. You're sitting there in a basement, no on-premises pub.

• 1:28Ben Thompson?

  Yeah, I'm drinking Diet Coke.

• 1:31Andrew Sharp?

  Probably, probably. Should we just cancel the pod here? Call it a day? In any event, we won't do that. We're going to begin with a company that we discuss only sporadically here on Sharp Tech. They did not make my definitive takeability rankings late last year, but I will read from Bloomberg. They write, shares of Spotify jumped the most in nearly eight years after the Swedish music streaming giant added a record number of users last quarter, far surpassing analyst expectations. The world's biggest streaming service added 38 million new listeners from October through December to reach 751 million, according to a statement Tuesday.

• 2:12Andrew Sharp?

  Paid premium subscriptions increased 10% to 290 million. Spotify said it expects to reach 759 million monthly active users in the current quarter. The company credited its annual wrapped campaign, which provides users with a personalized data-driven summary of their listening habits over the past year in a format designed to be shared and compared across social media. Spotify also cited the launch of an enhanced free tier around the world as contributing to the growth. Their shares rose as much as 19%, the biggest intraday gain since April 2018.

• 2:52Andrew Sharp?

  So I'm curious for general thoughts on Spotify, but first question is more specific. Has Spotify just won in streaming music? Are the Apple wars over at this point? Can we call it?

• 3:05Ben Thompson?

  Oh, I think it's been clear for years.

• 3:06Andrew Sharp?

  Okay.

• 3:07Ben Thompson?

  I mean, Apple Music, there are subscribers, there's YouTube Music, there's other ones, but the big thing is no one, it's kind of like iOS versus Android. It feels like people don't necessarily switch a lot. If they have one, they're kind of on it, but no one's going from Spotify to Apple Music.

• 3:26Andrew Sharp?

  Yeah.

• 3:27Ben Thompson?

  Whereas Apple Music users will slowly trickle to Spotify. We have a mutual friend of ours who was at Apple for a long time would sort of defend Apple Music and now he's not at Apple and he's like, actually, uh, he's a lot better. Yeah, he was, he was sort of raving about it.

• 3:45Andrew Sharp?

  But what's the mo, I mean, what's the stickiness for people who use Spotify versus Apple Music?

• 3:51Ben Thompson?

  Well, this is actually pretty interesting. I really enjoyed this earnings call. Earnings calls, you know, as a connoisseur of earnings calls who reads a lot of them. So Daniel Ek stepped down as CEO at the end of last year, December 31st. So this was sort of his, his last earnings call that he appeared on and he didn't answer any questions. He only sort of came on to sort of give his like, you know, final, final thing like, oh, here's our foundation going forward, which is basically like an articulation of like everything we did right in the past.

• 4:23Andrew Sharp?

  I was going to say it's something of a victory lap for Daniel Ek when you look back at the last 15 years or so.

• 4:28Ben Thompson?

  For sure. And, and I think a deserved one. Spotify, whatever you want to say about it, you have to remember back when it started. Sort of dragging the entire industry kicking and screaming into this new world. And a new world that really fundamentally redefine what was being sold.

• 4:49Andrew Sharp?

  Mm hmm.

• 4:50Ben Thompson?

  You talk about this in the context of media generally, like newspapers. Is it turns out they were actually a light manufacturing business with a delivery fleet. Right. They're like a white manufacturing and trucking business. And no journalist like wants to hear that. Uh, no, people that we, we, we survived because of my brilliant writing. I don't know. Turns out that really wasn't the case. And once all those aspects of what your business actually was became immaterial. Because it was completely wiped out by the internet. That's how you actually got news. Turns out they were all in big trouble. They're all competing with each other and we sort of talked about exactly that a week ago.

• 5:25Andrew Sharp?

  Yeah.

• 5:26Ben Thompson?

  So in what was it music? Music was also like a plastic manufacturing business. You made CDs, right? And then that's what you actually bought. There were lots of interesting things about that. Like you had the phenomena of bands having one great song.

• 5:42Andrew Sharp?

  And having to buy the album. Yeah.

• 5:45Ben Thompson?

  All of which sucked.

• 5:46Andrew Sharp?

  Mm hmm.

• 5:47Ben Thompson?

  And then you would obviously have to make your own mix CD. And you get a CD burner and you could, you could make, or even before that you would make mixtapes, right?

• 5:54Andrew Sharp?

  Exactly. For the kids out there, it was actually very exciting. You get a pack of like 20 CDRs and just make mixes back in 2001.

• 6:04Ben Thompson?

  Before your day, what we would do is you would have like a boombox that had a record function. And you would always have it with you with a tape ready to go. And then you would listen to the radio. And when a song you liked came on, you would quick run over and hit the record button. So you could get the song and then you would do that until your tape was full. And then you could listen to your favorite songs. Missing like the beginning and end of them are like DJs talking over it or whatever it might be.

• 6:33Andrew Sharp?

  A hundred percent. That was, that was my entry into music was actual cassette tapes that were recorded from the radio. And then it got a little bit more exciting and easier once CDRs came around.

• 6:47Ben Thompson?

  Right. And you could actually get the real songs from, that's right. So, but, but what was, what did Spotify sell? Spotify sold convenience. You can still, in a world where Napster suddenly, you could go get any song you wanted. That got sued out of existence and there was like Nutella. Even before that, I've talked about, I would go on like FTP servers. You could like random FTP servers.

• 7:08Andrew Sharp?

  The original pirate.

• 7:09Ben Thompson?

  Over the internet.

• 7:10Andrew Sharp?

  Yeah.

• 7:10Ben Thompson?

  Yeah. And the, if you just paid a small monthly fee, you could get access to all the music in the world. And you could theoretically go and get your MP3s on the dark web or whatever it might be. And you could make your CDRs or you could sync it with your iPod and whatever. It's, you know, there's people that did that. There's weirdos like you that still like buy digital albums.

• 7:35Andrew Sharp?

  Yes. I, I still do, but it is interesting because the industry had internalized the disruption from Napster and then adjusted. And by the time you got to like 2007, 2008, they had kind of figured out how to crack down on piracy. And the model was buying songs on iTunes or buying albums on iTunes. And that's how people made their money. And then Spotify ushered in a completely different pivot a couple of years later.

• 8:05Ben Thompson?

  Right. And to be clear, the digital selling of tracks never really made up for CDs. Like selling, selling a 99 cent track when actually there's only one good track that you want is not as good of a business of selling a $15, $16 CD, most of which is filler. So, but do you, before we progress.

• 8:24Andrew Sharp?

  Okay. Oh, boy.

• 8:25Ben Thompson?

  Are you asking this question to set up this discussion or because you still don't have a Spotify subscription?

• 8:31Andrew Sharp?

  Um, wow, putting me on the spot here. This is embarrassing. I don't have, I certainly don't pay Spotify. I think I have some dormant emails that I've used to sign up for Spotify because I share our podcast via Spotify. Because their social graphics are superior to what Apple offers.

• 8:52Andrew Sharp?

  The disgust.

• 8:55Ben Thompson?

  No, it's fine. I don't feel as strongly about this one. I'm just amazed.

• 9:00Andrew Sharp?

  Well, and you know what's even more embarrassing? The reason I don't have a Spotify account is because I don't need to listen to new music. That's how washed I am. All the music I have, I own or pirated back in the day and that's, I'm set as far as that's concerned. Occasionally buy one song on Apple and beyond that.

• 9:18Ben Thompson?

  You, you, you got digital storage for MyCloud. I'm satisfied. I'm not going to push you anymore.

• 9:22Andrew Sharp?

  Exactly. And it goes back to the adage, the music that you love for life is the music that you were listening to when you first started having sex. So from 2005 to 2015, that's my payday. And then other than that, I don't need anything released since then. But continue with Spotify. Where did they take the industry?

• 9:42Ben Thompson?

  Well, so, so Spotify sells convenience and it turns out that it's funny because this, this came up, speaking of the, the cheeky pie podcast. We were talking about the idea of bundling and bundles in theory are amazing for everyone. Everyone makes more money. The consumer gets more choice, more access. It's a great deal. You saw this with TV. And the, and the weird thing is, is everyone has to be forced into a bundle and everyone tries to bail on it sort of as soon as possible.

• 10:10Andrew Sharp?

  Yeah.

• 10:11Ben Thompson?

  And you know, TV is the classic example. You had this that was forced on it by geographic limitations. You had like cable is so interesting because it started in little towns and then came into the cities. The cities had access, had easy access to the TV signal. If you're over the Allegheny Mountains in like central Pennsylvania, you can't get the Philadelphia station. So you had to put up a huge tower to get the signal and then run cables, literal cables to everyone's house. So they could watch the big city TV. And then Ted Turner is like, oh, I could just use satellite dishes to beam directly to the base station of all these cables.

• 10:45Andrew Sharp?

  Yeah.

• 10:45Ben Thompson?

  And boom, you sort of have cable and everyone makes more money. And why does everyone make more money? Because everyone is paying for everything.

• 10:54Ben Thompson?

  And that is better, the big winners were you and me. Mm hmm. Because we are sports junkies. And so we get access to all this sports, which is over time, everyone realizes this is actually the most valuable, the most limited sort of content, because it only happens once. And it's, you know exactly who you want to watch. It's not replaceable. It's not, not rival risk. Yeah. And we paid, you know, a hundred bucks a month or whatever it might be and got access to all these sports and it was amazing. And it should have cost $250 a month or something like that. Well, you will see what happens as we sort of get down. Yeah. We're approaching those territories. Uh huh. Because the, in a bundle, everyone pays for everything.

• 11:37Ben Thompson?

  And you get stuff that you would have never paid for yourself, but it's part of the bundle. So it's great. The key to getting a bundle working though, it's really hard to get the most valuable stuff in there. Because the most valuable stuff can charge a lot to its biggest fans and then can make the most money. This is the challenge with say a Substack trying to make a bundle. The people on Substack who are making millions of dollars, how is Substack going to get them in the tent? It's like, oh, you have to make a little bit of money from everyone instead of a lot of money from a bunch of subscribers that you're doing presently. And it's just really hard to sort of funnel people back into this constrained space. Mm hmm. Given these sort of dynamics.

• 12:23Ben Thompson?

  What's interesting about music and what made music unique is because of the label sort of oligopoly. Hmm. And maybe this is something for you to consider, uh, when industry concentration can actually be pro consumer. Which is arguably, I think, what happened in music. Because there was an oligopoly, if you could just get the, the, the four labels or the, I think the three labels and like more one, like the independent label or whatever it is. Then you could have

• 12:52Andrew Sharp?

  Bargaining power.

• 12:53Ben Thompson?

  If not all the music, right? Well, the key thing is you had someone to bargain with. If you're bargaining with a disparate mass, it's very like you can exert control in certain circumstances, like say, you know, Google or Facebook or sort of aggers generally do. But to get the supply organized in a way, you can offer a compelling bundle. It's easier to negotiate if you have a limited set of you know, who to negotiate with.

• 13:17Andrew Sharp?

  Mm hmm. Whereas if it's like a thousand different people, then you have to worry about the edge cases and the deserters. And particularly the high end earners.

• 13:25Ben Thompson?

  Right. Spotify, if everyone is totally separate and Spotify has to go to every individual artist. Your tiny little artist who doesn't know, doesn't have any income is like, yeah, I'll take whatever you're gonna give me. Right?

• 13:37Andrew Sharp?

  I'll take the audience.

• 13:38Ben Thompson?

  You go to like a Taylor Swift. It's like, how much are you gonna have to pay her to get her sort of in the bundle? But you know, Taylor Swift will complain about her label. But actually, in this case, it's because her music was owned by a label that it could be part of this negotiation as part of all these sorts of things. And so what happened is you have, I'm missing the numbers, but hundreds of millions of people paying. I don't know what the price is now. It was $10 a month. Now it's up to $12, $13, $14 a month.

• 14:08Andrew Sharp?

  Yeah.

• 14:08Ben Thompson?

  The key thing is, is there's a lot of people who are now paying less for music than they did before. The music omnivores that would buy a gazillion CDs and were actually spending like a few thousand dollars a year on music. They are getting, they are the sports consumers of music. They are getting all the music in the world and only paying, say, $150 a year. Amazing deal. But that's made up for the fact that people like me or the theoretical Andrew, who don't really listen to that much music or listen to the same stuff again and again. It's just whatever. It's $15 a month.

• 14:49Ben Thompson?

  And then if the new hot new album comes out, I could easily listen to it because I have a Spotify subscription. I'm overpaying, honestly, for Spotify. And you're not wrong to say, I'm not gonna pay for it because I just listened to all the albums.

• 15:05Andrew Sharp?

  The music I know and like, yeah.

• 15:06Ben Thompson?

  Right, exactly. So you're actually, in this case, I can't even be too mad at you because it actually does make logical sense. But it's also, it's convenient. I pay, I just pay it every month. I have a family plan. My daughter uses it a ton. She listens, like, she listens to a ton of new music, like, she's in college right now, like, so, like, it, it works, it's fine. I have no problem paying it every month. And because there's, you make up, you give a bargain to your whales by getting everyone else to pay the same amount they are. So, this is the one example of a, of a bundle that's sort of been reformed since then, and Spotify powered that, made it happen. And obviously, there's other alternatives on the way, but they

• 15:47Ben Thompson?

  were the forcing function to get the industry into a much better space. And the industry makes far more money than they made 20 years ago. Is it at the peak of the CD era, especially when you adjust for inflation? No, but all things considered, they're like, the music industry is doing pretty well.

• 16:04Andrew Sharp?

  Dire predictions and outlooks for what the music industry could have turned into.

• 16:08Ben Thompson?

  It seemed they were the worst, in the worst case, and it turned out they were the best case. But that's completely thanks to Spotify.

• 16:13Andrew Sharp?

  Well, thanks to Spotify and thanks to the oligopoly of record labels, kind of working in concert to navigate this landscape together. On the tech side, Daniel Eck on the call, part of the victory lap, was him saying, "We built our ubiquity play, that's called Spotify Connect, starting in 2011, right as we launched in the United States. At the time, every major tech platform was building their own walled garden for audio. The conventional wisdom was, pick an ecosystem and live inside it. We bet the other way. We decided Spotify should work everywhere, in your car, your speaker, your TV, your gaming console, regardless of whose ecosystem you're in. Apples, Googles, Amazon, Samsung, Sonos,

• 16:57Andrew Sharp?

  all of them seamlessly." Why was that the right bet in 2011?

• 17:02Ben Thompson?

  Well, so, there's two parts of this. So, before that, he talked about all the personalization that they do. So, the most famous is like the Discover Weekly, that introduced new songs to you, but now there's all these mixing and, and the algorithm that shows you stuff that Spotify thinks you're interested in.

• 17:17Andrew Sharp?

  Yeah.

• 17:18Ben Thompson?

  And what's interesting about this is this overall dynamic about network companies. Uh, and by network companies, the most famous, obviously, is, is Meta or, or Facebook. And we've talked about this idea. What's interesting about Facebook is it's this network everyone is on. And yet, at the same time, everyone's experience is totally unique. It's this sort of paradox of these networks. And you goes back to the feed. And this idea that your feed is going to be tuned and unique to you. Obviously, it started just with your friends and family. It started with your college, right? Your you at your your college email address. But then it expanded and friends and family and people you know.

• 18:01Ben Thompson?

  And now it's gone far beyond that to it's just all user generated content generally. Like when you watch Instagram reels. Blatant rip off of TikTok, which sort of got there first. This idea that actually we have infinite content. If we can be really good at sorting through that content. We can deliver you consistently compelling stuff that you are.

• 18:21Andrew Sharp?

  Engagement is high. And it's from people you're not following, people you've never met before.

• 18:25Ben Thompson?

  That's right.

• 18:26Andrew Sharp?

  Have no idea about.

• 18:27Ben Thompson?

  No, like if you're watching reels, you basically never see a reel from someone you know. Like like it's it's pure. It's entertainment that that is what it is for better or worse. And as we've been discussing for the last six to nine months. Turns out you can really twist the dials on that and just get people locked in more and more. And you saw more and more ads in there and all these sort of things. Yeah.

• 18:46Andrew Sharp?

  So in Spotify's case, is it a situation where the scale that they've achieved? Gives them the ability to just better personalize than any of their competitors? And the advantages just compound?

• 18:57Ben Thompson?

  That's right. They do like like so what's interesting about these networks is. If you're a on the outside, if you're a user. Everyone, it's like we talk about we're subscribed to Spotify. We view Spotify collectively as a singular entity. I have Spotify, you have Spotify, my friend is Spotify. Everyone has Spotify, whatever it might be, just like I'm on Facebook, you're on Facebook, everyone's on Facebook. What's interesting, if you take the perspective from the opposite way, from the in inside out perspective. It's actually millions, hundreds of millions, or in the face of Facebook, billions of individualized products.

• 19:38Andrew Sharp?

  Mm hmm.

• 19:39Ben Thompson?

  That is what is uniquely capable of technology. It's actually, even though it's a single network, the experience of that network at scale is totally unique and separate for everyone. Now, there's like broader sociological questions about this. Like, are, no one is actually having a shared experience.

• 19:57Andrew Sharp?

  Everyone?

• 19:57Ben Thompson?

  Yeah, everyone's having a completely individualized experience. But what is compelling about this is you can have, like, the initial Spotify, everyone just has access to all music. That's what they sold, that was the V1. Is you're selling convenience, you get all music. But that product is easily replaced with, say, an Apple Music. If all you're doing is like searching for a song that you already listened to, like, for you and me, the experience of Spotify and Apple Music is basically the same. It comes down to like different UI choices, right?

• 20:27Andrew Sharp?

  Right.

• 20:27Ben Thompson?

  All I'm doing is searching for the 90s alternative playlist. Like, that, that's really that, all that I care about. You're searching for like 2000 crappy rap or whatever it might be, yes.

• 20:37Andrew Sharp?

  Yeah.

• 20:37Ben Thompson?

  So.

• 20:38Andrew Sharp?

  And their ability to personalize, Spotify's ability to personalize is what distinguishes Spotify.

• 20:43Ben Thompson?

  That's what keeps people on there.

• 20:44Andrew Sharp?

  It's been, it's been a 15 minute answer to my question at the top about what the stickiness is for Spotify.

• 20:51Ben Thompson?

  They're just way better at this and you're in there and they know you. You've been listening to, people on Spotify have been listening to Spotify for years. Like Spotify has you pretty dialed in sort of at this point.

• 21:01Andrew Sharp?

  Yeah.

• 21:02Ben Thompson?

  And because of this.

• 21:03Andrew Sharp?

  So in 2011, was that, did Daniel X see that that was gonna be the advantage that Spotify would need to have in order to win? And is that why he wanted to just be everywhere and have as many users as possible as opposed to a walled garden?

• 21:18Ben Thompson?

  That's a good question. I, I, I, I would love to ask him. Um, I don't know Daniel super well. I only met him once. Maybe now that he has some free time, I can get him to come on. Although I do know Gustav, the, the, one of the new CoC EOs, uh, very well. So we'll, we'll see what we can, maybe, maybe I can ask him. But, um, it, it's, I just think it's an interesting object lesson about how networks evolve generally. I think when Spotify started, it was, it was just. Such a heavy lift to get the industry over the line of, look, this is better for you to put all this stuff available for one price. Stop trying to recreate the CD. That's that world's dead and gone. Just make everything available.

• 21:59Ben Thompson?

  But for a network to grow, for it to persist and for it to keep churn low, you like you need to evolve. And we've seen how Facebook has evolved and Spotify itself has evolved and it evolves in this really interesting way, which is you think about a network as being what makes compelling. It's the same thing for everyone. And the actual implementation of tech-based networks is it's totally different for everyone. That's what is actually sticky. And in this world, this was, it was a good lead in, even though he framed it as looking forward, it was more of a victory lap.

• 22:33Andrew Sharp?

  Yeah.

• 22:34Ben Thompson?

  It is defense. It was a good lead in to Gustav talking then later in the call about why they see AI as a huge positive for them. Like AI is like even more individualized. It's even more like custom to you. And Spotify has been sold down on like the success like AI music companies. And it's like, no, that like, this is all maybe an analog for software. I'm not going to go to an AI and ask it to make music for me. Like to the, for my playlist. I like the.

• 23:07Andrew Sharp?

  So in a situation where AI music proliferates, you think A, humans are still going to want human music, number one, and B, there's going to be so much more supply that again, you're going to be in a situation where Spotify, the aggregator is more dominant in that scenario.

• 23:26Ben Thompson?

  Right. And like people are like, oh, Spotify needs to make AI creation tools, right? I'm like, does Spotify sell guitars? Right? Do they? Do like the, the, uh, you know, no, the AI creation tools can exist. All that means is more supply for Spotify. And certainly there's a worry or concern that being overwhelmed by AI slop. But the reality is there's so much music in the world, none of us are ever going to listen to. This is similar to the YouTube issue, right? Like, like YouTube, you, Spotify. YouTube have a lot of similarities. They're also like YouTube is like to everyone else like to Netflix is Spotify's biggest problem for sure. But their whole skill set, the whole skill set of an aggregator is managing abundance.

• 24:09Ben Thompson?

  There's already abundance on the internet and there's a bit where if you're, if you're in an aggregator position, you've been honing the skills to deal with the deluge for years and years and years. And not just, so it's not just that you can filter stuff out. You can also find the stuff that's compelling and would actually be useful and good for your listeners. Deepening your moat, like the fact that, that you are actually in the, the abundance makes your product better. It doesn't make your product overwhelming. And in the meantime, you also get to on the front end, give a better experience to listeners. Your algorithms can get better.

• 24:52Ben Thompson?

  They have this new interface of like using natural language and asking like for different stuff and they can understand that. And by the way, most people aren't necessarily going to use that. But enough people use it. They get signal from that of understanding what requests go with what music that they can generalize to the entire usage of the app. And it's just, I just enjoyed their articulation of this because this is a little extra tidbit to go with the aggregation theory idea, which is why are aggregations, why are aggregators so powerful? And this idea that yes, they aggregate all the users in one place, so they control demand.

• 25:32Ben Thompson?

  How do you maintain that demand and how do you get these virtuous cycles of making that stickiness even deeper? It's actually by on one side, from one perspective, you're this one entity. And from the other perspective, you're actually the most customized, unique, delivering individual experience to every single user that you have.

• 25:53Andrew Sharp?

  Yeah. Well, and Spotify wrapped, undeniably brilliant and every single year entertains me.

• 26:00Ben Thompson?

  I always kind of dread it because like my Spotify wrapped is, is.

• 26:04Andrew Sharp?

  Number one.

• 26:06Ben Thompson?

  It is fairly embarrassing. It's like music I listen to like usually with the kids in the car. So there was a fair lot of K-pop Demon Hunters. Taylor Swift had a new album this year, so obviously that was on there. And then there's like my like Above and Beyond podcast that is basically the only thing that I listen to while I'm working. So there you go.

• 26:24Andrew Sharp?

  Great. Well, I always enjoy. We get a lot of sharp tech listeners, a lot of goat listeners, a couple of Sharp China listeners.

• 26:30Ben Thompson?

  Yeah, we do. I get emails like the true sort of, you know.

• 26:35Andrew Sharp?

  Sickos.

• 26:36Ben Thompson?

  Who, yes, their top four podcasts or top five podcasts are all Citecree plus products. We love you. We see you. We see those tweets.

• 26:43Andrew Sharp?

  I really appreciate it on that basis alone. All right. Final Spotify question, and this is just in the bar, in the, in the pub, in the Stripe pub, shooting the shit question. What's the better business between Netflix and Spotify if you're looking at the next 10 or 15 years?

• 27:02Ben Thompson?

  Oh, that's interesting. I, the, the problem that Spotify's always had is tied into why the business was possible in the first place. Because they were only negotiating with four entities, they could pull like probably the definitive digital bundle together. Like what is a bundle that was actually created by tech in a world without geographic constraints? It was the music bundle. And the problem is that the way to get them on board is those entities.

• 27:35Andrew Sharp?

  Getting pretty good deals.

• 27:37Ben Thompson?

  Like a direct share of their gross revenue, right? And, and so they've, you know, they have more and more power of the industry. They can make hits or not, and they, they get it back through like marketing deals that like the Discover Weekly is not completely organic. Like there's like, like you to get stuff in there and there's independent opportunities.

• 27:55Andrew Sharp?

  They're a centralized platform that all these musicians and labels now need, particularly if they're making most of their money on live performances.

• 28:04Ben Thompson?

  That's right. The labels need Spotify for sure. And, and their, their power has certainly increased, but they're still paying out a big chunk of their gross revenue. Like that, that it is a percentage. So as their revenue goes up, the revenue that they pay out also goes up. And so they've done a good job of sort of in adding things, adding on podcasts, adding on audiobooks. So it's not just sort of the labels. That's always been though, sort of like a fundamental weakness for them. Relative to say a Netflix, which the more sort of original content they do, you pay upfront in Netflix. You know, they try to not do residuals, for example, because they want to own it. Or like so K-pop Demon Hunters, Disney or Sony got a fixed amount of money.

• 28:49Ben Thompson?

  And all the benefit from that is just accruing to Netflix. They're not like paying out a percentage of their subscriptions to Sony forever. But on the other hand, the problem with video content in general is you don't go back to it to the same extent you do.

• 29:02Andrew Sharp?

  Exactly. Yeah.

• 29:03Ben Thompson?

  And so you have to always be making new stuff. And it's really interesting. Like this is part of the, I think, you know, one of the Warner Brothers bits is you have this golden era of TV. Like sort of like the eighties, nineties, two thousands, where you did generate music like content, right? Like your friends or your Seinfeld, people do just watch it again and again, like.

• 29:26Andrew Sharp?

  Totally. I mean, it's that what I, I wrote about it on Sharp Text like six weeks ago, or whenever the Netflix deal first went through. The rewatchable movies are effectively dead today, but Warner Brothers has a ton of the rewatchable movies. And Netflix has done well with rewatchable movies from the eighties and nineties and early two thousands. But there are fewer of them. And in order to keep people subscribed and keep people engaged, Netflix has pretty high fixed costs for new content. And so that's where I do kind of wonder whether the Spotify cost structure will end up looking better in the long run. Unless Netflix can engineer like a monopsony type situation where they're the only game in town.

• 30:08Andrew Sharp?

  And they can just drive costs down on new content, but we'll see.

• 30:12Ben Thompson?

  I mean, yeah, no, so that's why the question is interesting because yeah, they both sort of have a fixed cost component that they can't escape.

• 30:20Andrew Sharp?

  All right, and that is the end of the free preview. If you'd like to hear more from Ben and I, there are links to subscribe in the show notes, or you can also go to sharptech.fm. Either option will get you access to a personalized feed that has all the shows we do every week, plus lots more great content from Stratechery and the Stratechery Plus bundle. Check it out, and if you've got feedback, please email us at [email protected].