SPOTIFY CANCELS OUT BOTH LEGAL & ILLEGAL DOWNLOADS, EC STUDY FINDS

The European Commission has just released a study titled “Streaming Reaches Flood Stage: Does Spotify Stimulate or Depress Music Sales?” and there are so many stats and tables crammed into the 42-page document that it'll make your head swim. As luck would have it, DMN, CMU and numerous other sites have pored over the study and extracted the key takeaways so that we don’t have to.

Daniel Ek has stated that streaming actually increased paid download levels on platforms like iTunes, DMN’s Paul Resnikoff notes, but the study, published by the EC’s Joint Research Centre, emphatically refutes that claim. “We find that Spotify use displaces permanent downloads,” it states. “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.”

But don’t get too excited. “While we find evidence that Spotify displaces piracy, the new revenue generated through streaming payments (coming from formerly pirate consumers, buyers, or individuals that used to forgo consumption) is roughly offset by revenue reductions from the sale of permanent downloads,” the report concluded. Specifically, 47 Spotify streams replace one illegal download.

“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.”