Econ Study Says Taylor Swift Is Wrong About Spotify

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Is Spotify good for the recording industry? Or is the world's leading streaming service undercutting it? The company argues that by offering both free and paid subscription listening, it helps overall music sales by fighting piracy while converting some fans to paying customers. Critics—most prominently one Taylor Swift—say it hurts artists by convincing fans they shouldn't have to pay for tunes while paying out negligible royalties to artists.

It turns out that both might be wrong. In a new working paper, University of Minnesota economist Joel Waldfogel and Luis Aguiar of the Institute for Prospective Technological Studies in Seville, Spain, estimate how Spotify has affected both music sales and piracy during its fast expansion across the globe. Their method: comparing countries where the service grew rapidly between 2013 and 2015, and those where it didn't. The upshot? According to the authors' calculations, Spotify does seem to have put a damper on piracy, but it's also displaced some digital sales (neither is exactly a shocker). Add it all up, then factor in the payments Spotify itself is sending to labels, and the effect appears to be roughly "revenue neutral" for rights holders. They don't make any more money. They don't make any less.

As the paper notes, "It is not clear that revenue neutrality is an indication of success," given that some might have been hoping that streaming would increase overall music sales. But at least it suggests the platform isn't sapping the life out the business.

f these findings hold up (again, it's just one working paper), it should put the ongoing debate about Spotify's treatment of artists into some new perspective. If the platform's business model hasn't shrunk the total pie of cash being divvied up by rights holders, but some artists really are seeing their paychecks shrink, it suggests the problem (insofar as one exists) has to do with the way record labels are distributing the cash. In which case, by singling out on-demand streaming as the source of artists' woes, people like Swift are fingering the wrong villain.