For as long as it’s been around, Spotify has been at the center of a heated — and often confusing — debate. There are those that sing its praises, those that simply DGAF, and those that bemoan what they see as a raw deal. According to a new study, that latter group may be condemning the wrong company.
According to a new working paper (via Slate) by economist Joel Waldfogel of the University of Minnesota and Luis Aguiar of the Institute for Prospective Technological Studies in Seville, Spain, Spotify may not have any sort of negative effect on the music industry. True, it may not have any positive one, either, but the key here is that it doesn’t seem to be hurting the industry’s revenue.
The pair looked at data from countries where Spotify saw a swift rise between 2013 and 2015 and compared it to date from places where it didn’t. What they found is that, on the one hand, streaming services seem to be slowing pirating. More people are turning to streaming as opposed to hopping on TorrentFreak. On the other hand, streaming also has a negative impact on individual track sales. More people will stream a song repeatedly than buy it just once.
That’s not terribly shocking news, but it’s the offset that really matters. Fewer people are buying songs, but more people are opting into a service that pays into the industry, and the net gain appears to be even. Aguiar and Waldfogel say that one unit of sales “appears” to be displaced by 137 Spotify streams. “Given the current industry’s revenue from track sales ($0.82 per sale) and the average payment received per stream ($0.007 per stream),” the researchers write, “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.”
Keep in mind that these are the findings of just one working paper, and one that notes “it is not clear that revenue neutrality is an indication of success.” Still, if what they find holds up, it would seem the amount of money the record industry is receiving isn’t any less due to streaming. If artists are seeing less of that money, then the problem is with their label deals, not with streaming services.