Spotify Research: Holdouts Suffer Far Greater Piracy, Lower Relative Sales…

The research report, authored by well-respected economist Will Page (now an employee of Spotify), comes on the heels of a high-profile pullout from Thom Yorke of Radiohead.  And what it says is this: not only is there no negative correlation between streaming and downloading (ie, ‘cannibalization’), but streaming holdouts typically suffer much higher levels of piracy, and far lower relative levels of paid downloads.

The focal point for this study was the Netherlands, with holdout artists like Rihanna and Taylor Swift compared to non-holdouts like One Direction and Robbie Williams.  “At one end of the spectrum, take two releases that appeared on Spotify at the same time as iTunes and other sales channels: One Direction’s album Take Me Home and Robbie Williams’ single ‘Candy’. Both were successful on Spotify and sold 4 copies per BitTorrent download.”

“At the other end of the spectrum, Spotify holdouts suffered higher levels of piracy: Rihanna’s Unapologetic and Taylor Swift’s Red sold only 1 copy per BitTorrent download.”

Case Study #1: One Direction vs. Rihanna.

“One Direction’s Take Me Home was the most popular album on Spotify from
our sample and also had the highest (best) sales to piracy ratio of 3.79 copies
sold per BitTorrent download,” the report states.  “Unapologetic, by Rihanna, was released the
following week but did much worse, selling only 1.36 copies per BitTorrent
download.  This ratio is evident in the gap between the sales and BitTorrent lines
on the charts below.”

spotifyholdout1

spotifyholdout2

Case Study #2: Robbie Williams vs. Taylor Swift

“The pattern is repeated by Robbie Williams’ Take The Crown and Taylor Swift’s Red albums,” the study continues.  “Like Take Me Home, Take The Crown was released on Spotify on the same day as through other channels and it suffered a lower level of piracy.”

“By contrast neither Unapologetic nor Red were on Spotify and both suffered relatively more piracy.”spotifyholdout3

spotifyholdout4

59 Responses

  1. Casey

    I am not sure their statistics are really that great, but the concept is no doubt true. There are a lot of people who are ex-pirates and using Spotify, but go back to their pirate heritage when they can’t find a song they want to hear. It’s a pretty simple concept to grasp. They are not going to go out and buy the song simply because they can’t listen to it on the music subscription they pay money for. They are either going to wait or steal it.

    Reply
    • Visitor

      “There are a lot of people who are ex-pirates and using Spotify, but go back to their pirate heritage when they can’t find a song they want to hear”

      Just like they’ll come back to iTunes when we stop mainstream piracy.

      Reply
      • Casey

        That’s assuming they ever went to iTunes in the first place. Most modern pirates went directly from CDs to piracy. If their P2P is shutdown or heavily policed, they are much more likely to download their desired music from Youtube or Grooveshark than they are to begin buying music from iTunes or Amazon. That pirate habit is hard to break because money speaks volumes. They may risk financial ruin if they get caught downloading from P2P, but not so with Youtube and they know it. Youtube can get the job done just as well as the torrnets. Mainstream piracy is very diverse and can adapt very quickly. We have a much better chance of getting people to pay $10 or even $15 per month for a music subscription than we do taking out piracy and making them buy individual songs on iTunes.

        Reply
        • Visitor

          We will reverse every possible method of getting music for free. It’s a snap.

          Everyone will go back to buying $18 CDs. Duuuhh.

          Reply
          • Visitor

            “Everyone will go back to buying $18 CDs”

            Of course not. 🙂

            Everybody can afford to buy music from iTunes and Amazon today. That’s a beautiful thing and it’s not going to change.

            But everything else is.

          • Visitor

            No thanks. I rather my music sell for 90s prices then early 00s prices. iTunes is a another post-piracy service that fixes prices and forces music to be sold unbundled at the disadvantage of the artist.

          • Visitor

            “I rather my music sell for 90s prices then early 00s prices.”

            I don’t think this is fair to consumers.

            There’s no doubt mainstream piracy is going away, but that’s no reason to punish your fans.

            Prices must reflect the fact that we don’t have to pay for print, paper & plastic anymore.

          • Visitor

            That sounds like a pirate argument. $18 is very reasonable for a CD. We don’t even factor in inflation. Really a CD should cost something like $35 today.

        • HansH

          You have to take in mind that the survey was held in The Netherlands. P2P Downloading is legal in The Netherlands.

          Reply
          • Visitor

            Yeah, it’s beyond me how that fact can escape everybody here…

            Again, it might as well have been about China.

      • Myles Na Gcopaleen

        You forgot to mention free spotify in your list of alterantive sources of free music that pirates turn to.

        I realize that at least one app that was designed to save spotify files has been shut down, but it is only a matter of time that another comes around.

        or you can do it the old fashioned way and hit the record app button while free spotify plays every song you ever wanted

        Reply
        • Casey

          Well the app took advantage of the lack of encryption and use of a poor delivery system. Spotify fixed that and they did a good enough job that another downloader has not showed up. But you would be surpised how many services suffer a similar flaw to this day and remain unfixed. Spotify was just unlucky enough that it made the media and so they had to take action. Most who use Adobe Flash are still vulnerable to flash downloaders. Some are still vulnerable to the legacy versions of adobe flash for unix. That’s just sad, even if nobody uses it anymore.

          Reply
    • Bending_Spoons

      1. I don’t understand your statement that there is a connection between streaming and piracy. The whole point of the article was to show that availability on Spotify decreases piracy. However, I’m not sure that the examples that were given absolutely prove that point–notice that One Direction’s sales started out much higher than Rhianna’s, possibly due to factors other than being available on Spotify.2. “when we stop mainstream piracy.”So how’s that workin’ out for you? Been successful stopping piracy? (Sarcasm intended.)Hasn’t the RIAA been trying to stop online music piracy for the last decade and a half?

      Reply
  2. Visitor

    Streaming and mainstream piracy are the most popular ways of abusing artists today.

    It’s neither a coincidence nor a secret that they interact intimately.

    And the fascinating part of their interaction is that streaming will die at once when we stop mainstream piracy.

    Reply
    • Me

      Lol. What? You couldn’t be more wrong. You think people who are used to getting their music for free are going to suddenly start paying top dollar for every album when there’s a free/cheaper alternative (i.e. streaming)? You don’t really understand human nature, do you.

      Reply
      • Visitor

        “You think people who are used to getting their music for free are going to suddenly start paying top dollar for every album when there’s a free/cheaper alternative (i.e. streaming)?”

        Not sure what you mean.

        No rightholder will give her work away for .005 when she can get .70.

        So streaming will obviously die at once when we stop mainstream piracy.

        Reply
        • Me

          I just don’t understand why killing piracy would kill streaming as well. If you manage to shut down all pirate sites/services/etc., how does that affect streaming sites negatively? I’d imagine most people who are used to getting their music for free would flock to sites like Spotify where they can continue to get a large catalog of music for free.

          Reply
          • Visitor

            “I just don’t understand why killing piracy would kill streaming as well. If you manage to shut down all pirate sites/services/etc., how does that affect streaming sites negatively?”

            I just told you.

            Which part of the following fact don’t you get?

            No rightholder will give her work away for .005 when she can get .70.

            You do understand that Spotify will die without artists, yes?

          • smg77

            He thinks that if he waves his magic wand and stops piracy that music lovers will forget the last 15 years and go back to paying $18 for a CD with two songs on it they want.

  3. Bending_Spoons

    1. I don’t understand your statement that there is a connection between streaming and piracy. The whole point of the article was to show that availability on Spotify decreases piracy. However, I’m not sure that the examples that were given absolutely prove that point–notice that One Direction’s sales started out much higher than Rhianna’s, possibly due to factors other than being available on Spotify.2. “when we stop mainstream piracy.”So how’s that workin’ out for you? Been successful stopping piracy? (Sarcasm intended.)Hasn’t the RIAA been trying to stop online music piracy for the last decade and a half?

    Reply
    • Visitor

      “I don’t understand your statement that there is a connection between streaming and piracy”

      Streaming is a direct reaction to mainstream piracy.

      Remove mainstream piracy, and streaming sinks like a stone.

      “Hasn’t the RIAA been trying to stop online music piracy for the last decade and a half?”

      Sorry, but you’re living in the past.

      See, the wonderful news is that music sales rose last year for the first time since 1999:

      Source: Financial Times, February 26, 2013.

      http://www.ft.com/intl/cms/s/0/f7b0f2b0-8009-11e2-adbd-00144feabdc0.html#axzz2MNEc5fTL

      Now, rightholders predicted this would happen when MegaUpload’s fall initiated the first internationally coordinated war on piracy in January 2012!

      Since then we have seen a wide range of beautiful initiatives around the globe:

      * New Intellectual Property Crime Unit in the UK this month.

      * New tough anti-piracy laws in Russia, Japan, Norway and several other countries.

      * New improved version of Hadopi on its way in France: Pirates now have to pay!

      * 6 Strikes and lots of other initiatives in the US.

      * New absolutely mindblowing anti-piracy technology on its way from AT&T.

      * Torrent sites (originals as well as proxies), lockers & illegal Usenet index sites shut down all over the place.

      * Huge fines to piracy site owners.

      * Paypal boycot piracy sites.

      * Credit card companies boycot piracy sites and vpn’s.

      * Huge brands stop their cash flow to piracy sites.

      * The final verdict over Tenenbaum sets precedence and sends strong signals to criminals: Yes, a stolen song is indeed worth $22,500!

      * Google signs White House Agreement to reduce Ad-Supported Piracy.

      The Piracy Decade is over, my friend. Get used to it.

      Reply
    • David

      No Western government has yet taken any serious steps against piracy. Copyright holders are left trying to enforce their rights through hopelessly inadequate and out-of-date legislation like the DMCA. The one serious attempt to toughen up the legislation (SOPA/PIPA) was shouted down by outrageously dishonest propaganda from the tech lobby and its shills.

      Bit if we look further east, both South Korea and Japan have much stronger copyright enforcement, and their music industries are booming. It is difficult to prove cause and effect, but the next time someone says legislation against piracy cannot work, I would say ‘Why don’t we try?’ We could start by imposing a mandatory thousand dollar/pound/euro fine for each occasion when a corporation is found advertising next to a copyright infringement. Cut off the flow of blood to the head, and the body will fall.

      Reply
  4. Mike Corcoran

    It would be interesting to know what the Spotify green line represents, as in, how many streams per sale/torrent. The graphs want us to believe Spotify streams are just at or slightly above sales/torrents, and in Robbie Robertson’s case, actually below sales. I would think this isn’t the case.

    Is there any info – in terms of units – on the vertical bar in these graphs? Anything more than 150-200 streams per sale and you might make the case to keep your music off Spotify.

    Reply
  5. pho

    Will Page is an extremely smart guy and spotify was smart to hire him.

    This is the Rosetta Stone for stupid artists and labels claiming cannibalization and that windowing is a smart strategy for not losing money.

    And there has been zero evidence or analysis from any label or management to support the opposite.

    Reply
    • Faza (TCM)

      Will Page is indeed a smart guy, which is why it’s sad to see him come to this.

      The problem this doesn’t address is that Spotify is only marginally better than BitTorrent as far as revenue is concerned. As an economist, my first instinct when looking at the charts is to see what’s missing, namely: a scale for the Y axis. In other words, these charts illustrate the relative relationships between streaming, piracy and sales, without going into the actual numbers in each case.

      Why is this important? Because numbers for sales and streaming determine how much money you make. We already know that even a very high volume of streams won’t net you a large amount of cash (given that each stream is worth only around half a cent). Therefore, the only thing that matters is whether a streaming-plus-sales strategy makes you more money than a just-sales one. These case studies provide no answer to that question.

      Let’s be clear: we don’t care about moral victories over piracy, but about how much money we make. If piracy led to higher sales (and revenue), as has sometimes been claimed, few people would be complaining about it. The same goes for Spotify.

      I’m not saying that Page’s case studies don’t actually show that streaming is good for total revenue, but absent the aforementioned info, this is pure spin.

      Reply
      • David

        It’s an interesting but very limited study. For one thing, I wonder about the audience demographics. One Direction and Robbie Williams are very much aimed at teen or pre-teen girls; Rihanna and Taylor Swift not so much. Young girls may have a lower propensity to piracy than other demographic sectors.

        But leaving that aside, as Faza points out, the study doesn’t show what is the effect on overall revenue. Maybe it just means that streaming cannibalises piracy more than it does sales!

        Reply
        • Faza (TCM)

          I’d actually go further and remind everyone that this report comes from Spotify itself and we should therefore approach it with the same base level of trust as research on the health effects of smoking authored by a tobacco company.

          I’ve just downloaded the report from Spotify’s website and will be digging into it presently. I’ve noted that it appears to be mum on the volume questions (at least on the charts, which reminds me of this), though perhaps there’s a bit more substance in the text. Either way, I’ll publish a review once I’m done with it.

          Reply
          • Visitor

            “this report comes from Spotify itself and we should therefore approach it with the same base level of trust as research on the health effects of smoking authored by a tobacco company.”

            Spotify & Smoking Is Good For You! 🙂

            Then there’s the other hilarious detail:

            This is about the Netherlands.

            Seriously.

            It might as well have been about China. Both are notorious developing countries what piracy is concerned — which seems to be related to the fact that neither are able to produce music of any importance to the rest of the world.

            Now, compare that to the country that gave us the greatest bands on earth, the UK:

            They know the value of music. And they know how to protect it. Not a week seems to go by without new British anti-piracy measures.

            Can’t wait to see their 2013 and 2014 sales!

          • HansH

            Come on Visitor, you obviously don’t know the situation in The Netherlands. As far as EDM is concerned we are one of the leading countries. Is not just tulips, windmills and wooden shoes here.

            We don’t know the value of music? Well we don’t like Taylor Swift. That alone proves you wrong 😉

            Did you know that pirating music (the downloading part of it) is 100% legal in The Netherlands. Now take that in mind and look at the grahps again. P2P is free and legal, still people prefer streaming. You know why? Because streaming is more convenient.

            Conveniency is the key not legislation. Spotify and Netflix are more efficient in killing piracy than any law in the world.

          • Visitor

            “Did you know that pirating music (the downloading part of it) is 100% legal in The Netherlands”

            Um, why do you think I compared Netherlands to China…

            Nigeria would’ve been my second choice.

          • Visitor

            I didn’t mean to insult Nigeria, I’m sure they have good reasons for piracy.

            At any rate, it’s time for touring musicians to boycot the Netherlands.

          • HansH

            Will not help. They all love to come to The Netherlands because smoking weed ls legal here too.

  6. Visitor

    “They all love to come to The Netherlands because smoking weed ls legal here too”

    Oh please, musicians can find weed anywhere. 🙂 It’s a special talent we’ve got.

    And yes:

    Touring artists have to boycott the Netherlands!

    Why support the national equivalent to the Pirate Bay?

    And Paul, why not do a story on this?

    Artists all over the world finally have begun to fight, shame and choke the commercial Piracy Industry — and yet we support an entire country that has turned into a well organized criminal organization, stealing Intellectual Property from international musicians for millions every year.

    Wars have been fought for considerably less.

    Reply
    • HansH

      You sure are a scary guy with crazy ideas. Better read the report again. Music piracy in The Netherlands is dying. Streaming is the new king.

      Reply
  7. Visitor

    “This is the Rosetta Stone for stupid artists and labels claiming cannibalization and that windowing is a smart strategy for not losing money.”

    So Spotify windowing is a bad strategy because — wait for it — a Spotify report says so? 🙂

    Meanwhile, we now have proof that streaming not only cannibalizes but kills music sales in the real world:

    “it’s [streaming] clearly starving almost every other format: according to the data, downloads are down a drastic 21 percent over the same point last year. Physical sales, already in deep trouble, plunged 29 percent.”

    http://dmnrocks.wpengine.com/permalink/2013/20130711norway

    Spotify windowing is the new trend, and it’s here to stay.

    Reply
  8. NoNotice52

    “Preventing us from ripping you off won’t prevent other people from ripping you off, so you might as well let us continue to rip you off”. Boy, that’s a really profound and compelling argument.

    Reply
    • Myles Na Gcopaleen

      That is the reality of music business today

      Since recorded music has been devalued to absolute zero, musicians should be happy spotify might pay them pennies

      Musicians and songwriters must realize that it is only going to get worse before it gets better, if it ever will get better at all.

      Reply
  9. Visitor

    Well at least we have conclusive evidence that Spotify cannibalizes something.

    Reply
  10. 1978

    Funny how this comes out right after Thom Yorke leaves? All about Swift Boating baby…

    Reply
  11. Fab

    I propose a very simple explanation. I think Rihanna and Tailor Swift are like chewing gums for people. Why buy their cds ? They are totally replaceable and we can hear them all day long on radio, etc. Even if One D and Robbie Williams do a true mainstream pop music, they engage more their fans. But anyway, Spotify still has a really bad influence.

    Reply
  12. On the other hand...

    This doesn’t say anything about how windowing or withholding impacts non-superstar artists.

    Which is who Thom Yorke was speaking up for.

    Reply
  13. Kevin King

    never was good with the term “pirate” or “piracy”, I would rather use “forward thinker” to describe a new generation of music discovery and consumption. Guilting consumers into feeling sorry for artists will never work, nor suing them. Quit bitching and help innovate. I’ve been on the innovation side for 8 years now…..coming from the traditional side. I had an executive tell me once…”if people continue to steal music, I won’t be able to send my kids to school”…..change careers or start the march to change.

    Reply
    • Myles Na Gcopaleen

      I agree.

      Performers and songwriters must realize that their occupation and their product has been devalued so much that making a living in such an outdated and archaic way is laughable.

      They need to get with the program, get a job at a tech company that it is focused on marketing and scale. Write some code that maximizes profit and increases efficiency. Wait for some vacation days to accrue then they can write and/or perform music on the side.

      Reply
      • Visitor

        “then they can write and/or perform music on the side”

        Trust me, you don’t want to live in a world without professional musicians.

        Reply
    • Visitor

      “Guilting consumers into feeling sorry for artists will never work”

      Agree.

      And that’s why countries all over the world introduce new anti-piracy laws and enforcement right now.

      “Quit bitching”

      Yes, why don’t you?

      Reply
      • PiratesWinLOL

        “And that’s why countries all over the world introduce new anti-piracy laws and enforcement right now.”

        Right now? Whoooooo, that sounds to brutal and dramatic. I can almost hear the sirens in the background now. Maybe the united front of starving artists, will actually manage close down GrooveShark and PirateBay within the next 20 years then. You tell me when it happends Rambo. Pirates will have to update their shortcuts then, so that they can reach their new servers in Honduras.

        Reply
  14. the barn door is WIDE open

    Spotify and other streaming services are simply this: http://en.wikipedia.org/wiki/Freemium

    Cant sell at premium? (Cos no one will buy it)

    Cant give it away? (Cos there is no profit in that)

    Make it rentable – Sell us all something we dont (and will never) own. Just like “airtime” it DOESNT EXIST.

    Its a new world in terms of not just how you get music but how you CHOOSE to get music.

    “Whatever works” is the mantra of the current generation of young consumers and they are a whole lot smarter than some suits in their corporate suites…

    Witness Universal trying crowd funding and you see them scrabbling to keep up…

    Reply
  15. NoNotice52

    @ Myles: Here’s a better idea: why don’t you and all your buddies who are “focused on scale and marketing” write your own songs and sell those instead? You can just “do that on the side.” Then, when nobody wants to listen to your crap, even for pennies, your service will fail and you’ll need go get a real job instead of being a poacher of the valuable product of other people’s dedicated hard work. Seriously, I challenge you: buy a guitar, write a song and perform it in front of an audience (of people you don’t know). The feeling you’ll experience then is called “growing a pair”.

    Reply
  16. stan stewart (aka @muz4now)

    I suggest a new headline:

    “Pirates love Spotify”

    Reply

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