Spotify CEO Daniel Ek has long positioned his company’s music streaming service as a way to convert pirates into paying customers. Unfortunately, until now it’s been difficult to verify those claims. Thanks to a new study from the European Union’s Joint Research Centre, we now know that the service does, in fact, help beat piracy, but that it does so at the cost other platforms that help users obtain music legally.
To study Spotify’s effect piracy, the report’s main researchers, Luis Aguilar and Joel Waldfogel, tracked, on a weekly basis, the number of times tracks from more than 8,000 artists were purchased online and obtained illegally through methods like torrent sites. They then compared those numbers to streaming data they obtained from Spotify.
Their data shows that for every 47 Spotify streams, the service helps prevent one illegal download.
“This piracy displacement is consistent with [Daniel] Ek’s claim that Spotify’s bundled offering harvests revenue from consumers who – or at least from consumption instances – were previously not generating revenue,” says the report.
As mentioned earlier, it also turns out services like Spotify have a negative effect on other legal methods of obtaining music. The same study found that for every 137 Spotify streams, the number of digital track sales on platforms like iTunes is reduced by one. When one factors the disparity in revenue per stream and download, the overall impact of a service like Spotify is relatively neutral.
“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,” says the report.
“In other words, our analysis shows that interactive streaming appears to be revenue-neutral for the recorded music industry.”