Photo by Mark Ralston/AFP/Getty Images |
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.
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.
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