Spotify Is Now Smearing That EU Study on Piracy…

This is what happens when your entire business depends on the licenses of a few companies. Who also happen to own a piece of your company.  Because when the major labels pick a fight, Spotify doesn’t have the luxury of disagreement.

eureportsmear

Which brings us to a just-released European Commission study on piracy, one that Spotify is now helping to smear. The conclusion of that study is pretty simple: it states that piracy not only has little impact on music purchasing, it may actually be boosting industry revenues across legal formats.  And part of the reason is that those stealing music are typically more engaged in music, and therefore more likely to buy it.

The conclusion, if true, does little to resolve moral issues related to illegal downloading (not to mention the sites that serve those downloads).  But from a business standpoint, the findings make decisions to completely bury Napster, Grokster, and Limewire (and their users) seem largely misguided.  And, given that this is coming from the European Commission, there’s also a strong chance that it will affect piracy-related policies and laws moving forward.  All of which the major labels hate.

Predictably, the report has drawn a harsh reaction from recording industry trade group IFPI, who denounced the study as “deeply misleading,” “flawed,” and “disconnected from commercial reality.”

And for reasons that seem more political than empirical, Spotify has decided to step into this pile with a factually-incorrect smear.  In fact, this sloppy statement strongly suggests the report was not even read, but is rather a parroting of major label talking points.  It was issued Wednesday by Spotify director of economics Will Page, and incorporated into an IFPI-issued attack on the report.

“‘Digital Music Consumption on the Internet: Evidence from Clickstream Data’ is a flawed study. The narrow definition of the market chosen by the authors is both puzzling and deeply misleading. In particular, the omission of streaming services from the study fails to appreciate the diverse make-up of the digital marketplace.  As a result, the unfair competition that legal streaming services face from music piracy is not properly acknowledged by the authors – and moreover, the report fails to observe how consumers can migrate from illegal services into legal venues like Spotify.”

And the only problem with this statement?  It is largely incorrect.  For example…

“…the omission of streaming services from the study…”

Quite the opposite: the report contains 108 mentions of the word ‘streaming’, 40 mentions of ‘legal streaming,’ 21 mentions of ‘legal streaming website,’ and goes through all sorts of inter-relationships between streaming, paid downloads, and illegal downloading.

So Spotify isn’t a ‘website’?  Not exactly: Spotify is now both an app and website, and for that matter, has been integrated into web-based experiences though Spotify Play Buttons for about a year.

The study even concludes that legal streaming boosts legal downloading activity.  These mentions are sprinkled throughout the 38 page report.  In fact, the phrase ‘legal streaming’ is in the second sentence of the first page of the report, all of which sounds like the opposite of a complete omission.

But don’t take our word for it (or Spotify’s).  Here’s the study, check it for yourself.

“…the report fails to observe how consumers can migrate from illegal services into legal venues like Spotify…”

If streaming were completely omitted, this would be true.  But it isn’t: throughout, the report also makes it very clear that greater engagement from pirates tends to increase activity across both paid download and streaming channels.  On page 9, the report authors offer a detailed description of the overlap.

“In terms of music consumption, almost 57% of the individuals have clicked at least once on a legal downloading website. Similarly, 57% of the sample has clicked at least once on a legal streaming website during 2011. Finally, close to 73% of the sample has clicked at least once on an illegal music website during 2011. Note that these different types of music consumers are not mutually exclusive.  Figure 1 describes the distribution of music consumer types in the sample and reveals that only 40% of the music consumers belong to a single category. Twenty-six percent of the consumers actually belong to the 3 categories. More than half (60%) belong to at least two categories, and 53% of the sample consumes both legal and illegal digital music. Finally, note that 20% of the individuals in the sample have only clicked on illegal downloading websites.”

then later..

“Most interestingly, downloaders are also more active than legals both in terms of legal downloading (10% more clicks) and legal streaming (40% more clicks), as shown by their mean values of clicks.”

Actually, the EC researchers repeatedly state that streaming leads to greater legal purchasing activity.  But greater engagement on illegal channels also tends to boost streaming activity as well.

 

But again: don’t take our word for it.  Read the report, something Spotify may have forgotten to do.

Your turn, Spotify.

17 Responses

  1. Jaded Industry Dude
    Jaded Industry Dude

    I don’t care if Spotify or your Grandmother smears this study; the hard facts remain true that the second Napster was introduced, music sales went downhill and the rest is history. This article is sensationalizing an already sensationalized article and then sensationalized a DSP’s reaction to a sensationalized article.

    Fuck me, right? I remember 1999, 2000, 2001, 2002, 2003… I remember every fucking year and every fucking decline. Piracy does NOT equal sales. This EU study _IS_ flawed and _misleading_

    Reply
    • Guest
      Guest

      Actually those are not the hard facts. Blaming Napster alone for the decline of sales around that time, reveals a very shalllow knowledge of the actual parameters affecting the business at that time. Just sayin.

      But it is the simple thing to do so why not just whine about napster?

      Reply
    • wallow-T
      wallow-T

      “the second Napster was introduced, music sales went downhill…”

      For North America, the recorded-music market peak actually coincided, to the week, with two different events:

      – the effective SHUTDOWN of Napster as it implemented a court order to perform drastic filtering on searches

      – the all-time stock market peak, as the dotcom crash got underway.

      Reply
  2. Visitor
    Visitor

    In the 80’s, when I was a kid with no money, I taped everything from the radio. In the 90’s I spent ALL of my money on vinyl. In early 00’s illegal downloading was huge because it was new and exciting – I plundered Napster and Audiogalaxy but still bought vinyl. Now I have a monthly spotify subscription, buy direct from artists on sites like Bandcamp AND buy special edition vinyl – I spend more now on music than I ever did.

    Reply
  3. Person
    Person

    I think anyone even remotely aware of the history of digital music wouldn’t make any statements regarding the decline in physical media and the growth of digital technology. The music industry were presented with the mp3 technology in the mid 90’s as an opportunity to push forward the industry into the 21st century. The music industry declined, instead relying on their cash cow of physical product, where the cut of sales were a higher mark up then digital could ever present. The music industry’s (and from then on, the entire entertainment industry) slow, painful and greed directed crawl into digital was the reason they couldn’t compete in the market place in which they had an opportunity to run, own and manage 5 years earlier.

    This study (if anyone cares to ACTUALLY read it) is a well thought out, well constructed piece of research that highlights once again the propaganda of a dying, wealthy, traditional media industry that spends it’s time pointing fingers and distracting with sleight of hand instead of addressing their own mistakes and attempting to protect their business further than the next 6 months. The current smear is yet another example of how an industry responds to a rational study in need of debate and discussion rather than big headlines and burying of facts.

    Reply
    • hippydog
      hippydog

      Quote Person “instead relying on their cash cow of physical product,”

      Ditto on what Person said.

      If course piracy canabalizes sales..

      but what I take from the study is if the big labels had ALLOWED something like napster to exist and instead of killing it, they monetized it.. Piracy would not have grown to the point it did..

      Consumers, even with knowledge and ability to steal will many times make the right choice..

      Carrot and the stick people..

      carrot and the stick..

      Reply
  4. Knob Twiddler
    Knob Twiddler

    FWIW – ‘Streaming’ is actually one of 4 keywords listed below the abstract…….forget didn’t read it – try didn’t even open the bloody thing.

    Reply
  5. Visitor
    Visitor

    “But again: don’t take our word for it. Read the report, something Spotify may have forgotten to do.”

    And when you have done that, you can see the facts here:

    THE COST OF PIRACY

    10 billion Euros and 185,000 European jobs in 2008.

    Source: UNESCO:

    http://portal.unesco.org/culture/en/ev.php-URL_ID=40884&URL_DO=DO_TOPIC&URL_SECTION=201.html

    58 billion dollars and 373,000 American jobs in 2007.

    Source:

    Siwek, Stephen E.,The True Cost of Piracy to the U.S. Economy, report for the Institute for Policy Innovation, Oct. 2007.

    Reply
  6. Satisfied
    Satisfied

    Shockingly I am not here to join in on the debate. I am here instead to applaud the level of journalism. I have been doubting Digital Music News over the last couple months but the reports in regard to this new study have at least been well formated and more than just a repeat of what other bloggers are saying.

    Reply
  7. Suzanne Lainson
    Suzanne Lainson

    I’ve always felt Apple was the reason for all the illegal downloads. If you bought an iPod that could hold 1000+ songs and you didn’t already own CDs which you could convert to MP3s, how were you going to fill the thing up? Were you going to leave it mostly empty? Were you going to spend $1000 to buy songs? Or were you going to look for ways to get lots of songs for free?

    Reply
    • Paul Resnikoff
      Paul Resnikoff

      Suzanne,

      That sounds like a rather obvious statement to me, but it seems.that Apple’s role in the post-Napster history book has been mythologized as ‘saviour’. As in, Steve Jobs saved the download from piracy, etc.

      Yet the paid download has been a marginal activity alongside the free download for most of its life, hardware sales have been fueled by illegal downloads, and iCloud is now granting immunity to all those billions of free downloads.

      I guess everyone loves a hero, no matter what the actual story.

      Reply
  8. FarePlay
    FarePlay

    This makes perfect sense. These streaming services will have an impact on piracy, because they offer everything for free and in defense of their flawed business model, this will become a major branding talking point and justification for minuscule payouts to the artists. Something is better than nothing, right?

    Reply

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