Spotify Kills Piracy AND Paid Downloads, European Study Finds

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Spotify is causing a noticeable drop in music piracy, according to a just-released European Commission study.  But Spotify is also dramatically reducing paid downloads from iTunes and Amazon, with the net effect on music industry revenues balancing to

In other words, if Spotify and streaming music didn’t exist and piracy continued to rage, the industry wouldn’t be any better off.   “While we find evidence that Spotify displaces piracy, the new revenue generated through streaming payments (coming from formerly pirate consumers, buyers, or individuals that used to forgo consumption) is roughly offset by revenue reductions from the sale of permanent downloads,” the report, published by the Commission’s Joint Research Centre, concluded.

“In particular, 137 Spotify streams appear to reduce track sales by 1 unit.”

Spotify CEO Daniel Ek once declared that streaming actually increased paid download levels on platforms like iTunes, but that was further discredited by study authors Luis Aguiar and Joel Waldfogel.  “We find that Spotify use displaces permanent downloads,” the study notes.  “In particular, 137 Spotify streams appear to reduce track sales by 1 unit.”
The impact of streaming music on piracy has been heavily debated, especially as broader torrenting levels continue to increase.  But the Commission report found that Spotify solidly reduced illegal swapping and torrenting, with 47 Spotify streams specifically replacing one illegal download. “Consistent with the existing literature, our analysis also shows that Spotify displaces music piracy,” the authors asserted.

“In other words, our analysis shows that interactive streaming appears to be revenue-neutral for the recorded music industry.”

The Commission determined that the overall monetary impact was ‘revenue-neutral,’ though results will vary per artist.  In the case of unsigned artists like Perrin Lamb, who is receiving $0.004 (4/10ths of a penny) per Spotify stream, the numbers can land in the black. Others, particular major-signed artists like James Blake, are undoubtedly in the red.

That presented a dense thicket of numbers for the report authors, though using top-level, industry-accepted figures, the broader balance was determined to be zero.  “Given the current industry’s revenue from track sales ($0.82 per sale) and the average payment received per stream ($0.007 per stream), our sales displacement estimates show that the losses from displaced sales are roughly outweighed by the gains in streaming revenue.”

“In other words, our analysis shows that interactive streaming appears to be revenue-neutral for the recorded music industry.”

The full report is here.

Image: Two Dead Bohemian Waxwings by Lucas Cranach the elder, ca. 1530, public domain.

9 Responses

  1. DavidB

    “In the case of unsigned artists like Perrin Lewis”

    – who are also lucky enough to be picked out of thousands by Spotify for special promotion…

    • "Revenue Neutral" would be nice, but it's a lie...

      More spin and BS… first it was streaming would drive transactional sales, now it’s the “same revenue” as transaction sales… until it’s not… we’re headed to a self inflicted wound and death spiral tipping point where streaming cannibalizes the business down another -10-20% on overall year to year revenues over the next 3-5 years.

      Good grief, please for the love of God get these people some calculators and spreadsheets…

  2. Remi Swierczek

    …and any simple, and common sense methods of MUSIC MONETIZATION.
    Apple, Amazon, Google, Deezer are in urgent need of REHAB from Ek’s / UMG created DOPE.

    $200 billion of annual music goodwill is a no-brainer to non music person with little logic.

    To see THREE fortune 50 corporations with combine revenues of almost $400 billion in frontal attack
    on MAX $20 billion music streaming compost is PATHETIC.

  3. FarePlay

    So Spotify reduces piracy by 3%. Awesome.

    You really want to do something about piracy? End Safe Harbor Protection for pirate sites if you want to really do something: and automatically send a letter, it’s written already, to the 27 Congressmen serving on the House Judiciary Committee.

    For the many artists who don’t know, this committee is reviewing All copyright laws for the first time since 1976. Give artists the right to decide where their songs get played. Remove the loophole that has made piracy legal since 1998. Yes, Napster launched in 1999 using this loophole to try and circumvent the takedown notification provision.

    Since then, tens of thousands of pirate sites have gone online using this loophole to avoid prosecution. So, you can either complain or do something about it, now.

  4. illtalbeats

    Is this study specific to the European market or worldwide? I assume numbers could vary between country.

  5. Versus

    ” 47 Spotify streams specifically replacing one illegal download”

    So we can measure and track illegal downloads, but we can’t stop them?

    • Right? If You Can Track Um, You Can Charge Um...

      Funny how it is that these metrics can be calculated for those types of stats but not actually billing consumers for that consumption by the ISPs.

      What if all the ISPs started billing people $1.00 per song downloaded, and took the same 30% margin Apple does? Ha! That would be awesome wouldn’t it. Either buy it or pay anyway – that would change things pretty fast.