EU report: Spotify has little impact on music industry sales

We’ve received a European Commission report on the critical question of whether Spotify promotes or depresses commercial sales of music. Does it act as an incentive to consumers to buy music? Or does it suppress the desire to make a real purchase? The answer seems pretty unequivocal. Here’s the report summary:

Abstract

Streaming music services have exploded in popularity in the past few years, variously raising optimism and concern about their impacts on recorded music revenue.

On the one hand, streaming services allow sellers to engage in bundling with the promise of increasing revenues, profits, and consumer surplus. Successful bundling would indeed translate some of the interest in music not generating revenue through individual track sales – unpaid consumption and deadweight loss – into willingness to pay for the bundled offering. On the other hand, streaming may displace traditional individual track sales. Even if they displace sales, streams may however still raise overall revenue if the streaming payment is large enough in relation to the extent of sales displacement. We make use of the growth in Spotify use during the years 2013-2015 to measure its impact on unpaid consumption and on the sales of recorded music. We find that Spotify use displaces permanent downloads. In particular, 137 Spotify streams appear to reduce track sales by 1 unit. Consistent with the existing literature, our analysis also shows that Spotify displaces music piracy. 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.

spotify

Source: Institute for Prospective Technological Studies, Digital Economy Working Paper 2015/05

Streaming Reaches Flood Stage: Does Spotify Stimulate or Depress Music Sales?

by Luis Aguiar (IPTS), Joel Waldfogel (University of Minnesota and NBER)

 

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  • Makes some sort of sense. A useful application for ‘browse before you buy’, especially when you know that the physical product will end up sounding a little better in terms of sample rates (not meaning to open that bit-rate argument here!). So many new phones have so little physical memory that it is a handy tool.

  • CAREFUL!
    The title is completely wrong. Physical sales are nowhere in the study researched.
    The study explores the revenue from download/streaming vs Spotify.

    The study is probably meaningless for the music industry, since what really matters is, how the music industry can overcome the spotify cancer and go back to pre-piracy and pre-spotify revenue models of people actually paying for their consumption like in any other real world business.

  • What the study actually shows, is that Spotify has compromised the streaming/revenue model BEFORE the industry could even establish it. Got to be able to read statistics…

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