The NPD Bomb: Spotify Already On the Defensive

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Who would have thought that NPD Group would be stirring so much controversy?

After a rather downbeat research presentation at Digital Music Forum last week – first reported by Digital Music News – Spotify is already taking the defensive.

As part of the larger review, NPD Group researcher Russ Crupnick shared survey statistics showing that users of on-demand streaming platforms decrease subsequent purchasing of downloads, specifically by 13 percent.

That is a US-specific stat, one that further erodes the case for a cross-Atlantic Spotify.  But Spotify is spinning against the NPD finding, apparently hoping to show that on-demand streaming improves purchasing.  “There is other data out there to prove the exact opposite of that report,” a Spotify spokesperson recently told Fast Company.

But what data is that exactly?  The NPD result is not based on actual conversions, though it still seems logical.  On one hand, Spotify and other freebie on-demand outlets appear to be taking traffic away from P2P applications, a trend further reaffirmed by NPD.  But if fans are substituting free downloads for free streams, why would they suddenly start paying for downloads, especially given the ease of returning to P2P?

Other aspects of the cloud – still a work-in-progress – suggest that paid downloading is not a complementary behavior.  Theoretically, the cloud offers music fans the ability to access music from anywhere, at anytime, while skipping the downloading and storage of content.  Once the components of ubiquity proliferate (blanketed WiFi, broadband mobile connectivity, content caching to fill the gaps),  converts to the cloud would have little reason for fixed downloads.

Meanwhile, licensing prospects remain mixed.  At Digital Music Forum, Sony Music Entertainment executive Thomas Hesse expressed a willingness to embrace Spotify.  Others, most recently Warner Music chairman Edgar Bronfman, have expressed the total opposite.