By Carolyn Heneghan
Over the past month, rumblings in the music industry and media have thrown Spotify back in the spotlight. Thom Yorke and Nigel Godrich spoke out about the service’s alleged poor payout practices for artists and yanked their Atoms for Peace albums (along with Yorke’s solo album) from Spotify streams. SoundCtrl covered their conversation about Spotify’s royalty payments for artists in depth last month.
At around the same time, stirring still more media coverage, Spotify released a self-produced report that claimed that the service’s streams actually reduce piracy. And to take it one step further, Spotify purports that its service even increases sales for artists in the long run.
Misleading Headlines
When this report came out, support of these results splashed across headlines that shouted, “Spotify is killing piracy!” while few actually questioned the validity of such claims—except for SPIN and a few others—particularly claims which come from an in-house report.
If Coca-Cola does an in-house study and reports that its soda’s high sugar levels no longer harm the human body in any way, are you going to believe it? Then how are we to believe that Spotify’s numbers aren’t skewed in some way? Or that they don’t leave out important facts?
The first point that needs to be clear is that this study focused on Spotify use, music piracy and sales in the Netherlands only—not in the United States, though many U.S. outlets are writing headlines to appear as such, and not across the board.
Study Subjects and Windowing
Another point to consider is the 14 artists chosen as subjects for this study. Its high-flying example, One Direction, had the best sales-to-BitTorrent ratio when they streamed their album upon its initial release as compared to the other artists in the study. They reportedly sold about four albums for each illegal download. To note, they also had released a Spotify app, which may or may not have had any effect on these results.
Spotify’s least successful examples were Rihanna and Taylor Swift, who chose a different path: windowing, which means that they chose to release their album on streaming services later than the album’s initial release. According to the report, as a result, each sold roughly one album per torrent.
Artists still window their albums in hopes that holding off free streaming will encourage listeners to actually purchase the song or album. Spotify insists that windowing is no way to release an album, as it did not find one example where sales increased because of windowing, and illegal downloads still continued to rise since listeners still want to get their hands on the album without having to pay.
But Could Spotify Be Right?
Now, to be fair, Spotify does have a point about its service reducing piracy in general. Another study by the NPD Group came out early this year which showed that the number of illegally downloaded music files decreased by 26 percent from 2011 to 2012. Further, almost half of the participants who reported stopping or sharply reducing their music downloading habits cited streaming services as their reason for stopping.
Logically, if people can legally listen to their music for free, many people will choose that in lieu of illegal downloads, particularly now that so many are fraught with spyware and viruses. Streaming is not only safe and simple to use, but Spotify in particular offers more connectivity as a listening community, which is another unique reason that some users sign up for the service.
Music Downloads vs Streaming Revenues
What speaks less logically is that streaming services like Spotify would actually increase music sales. The claim appears to be counterintuitive, as many people would rather stream a song for free than purchase it, and the information cited by Spotify in regards to this matter could be deemed consequential.
However, outside of this study, there are reports that Norway’s overall music sales were up 17 percent more in the first half of 2013 than in the first half of 2012, in a country where streaming accounts for 66 percent of all music sales. Also, in Sweden, Spotify’s home country, music sales increased by 13.8 percent in 2012, where streaming accounts for 57.5 percent of those revenues.
This sheds positive light on the streaming revenue model… clearly, in countries where streaming takes up a larger part of the overall music market, recorded music revenue is up and experiencing somewhat of a renaissance. It’s reasonable to assume that if Spotify had the same market representation in the US as it does in Sweden (.5% vs 15%), the percentage of revenues it generates would be more favorable.
But the study, as one might expect, does leave out crucial facts that could affect Spotify’s arguments. For example, it’s completely left out the rates of illegal downloading in the Netherlands before November 2011, though numbers in the report date back to 2010, when Spotify launched in that country.
While Spotify does have a point and a place in the recent reduction of music piracy, the all-encompassing claims made by the report’s findings and subsequent sweeping headlines shouldn’t be taken at face value quite yet.
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