Depending who you talk to, Spotify is either the savior of the music industry or the beast that will bring it down.
Critics, like Taylor Swift and David Byrne, cite the low royalties per stream paid out to artists ($0.007 per stream in some instances). But boosters point to places like Sweden, where streaming has pushed the total revenue of the industry up, even as digital downloads fall.
In these arguments, it’s often hard to find objective data, the kind not cherry-picked by either side in an attempt to discredit the other. That’s why a new working paper by economists Joel Waldfogel and Luis Aguiar, first uncovered by Slate, is so useful.
The paper takes an academic look at whether Spotify has helped or hurt the music industry by comparing places it has seen sharp growth since 2013 and places where it has not.
Related story
The researchers looked primarily at two factors: whether Spotify hurts digital sales and whether it decreases music piracy.
The big takeaway? They found that Spotify was basically revenue neutral for the music industry.
“Given the current industry’s revenue from track sales ($0.82 per sale) and the average payment received per stream ($0.007 per stream),” they write. “Our sales displacement estimates show that the losses from displaced sales are roughly outweighed by the gains in streaming revenue.”
It’s a wash. They found that every 137 Spotify streams cannibalized sales by one track, which was about as much as Spotify was giving back to the industry in payouts.
The pair found that Spotify did have a negative effect on piracy, but that the gain in streaming revenue from reformed pirates was just enough to keep Spotify’s effect on the industry at neutral.
This paper suggests that Spotify is not a force for good or evil in the music industry, and that low artists payouts have more to do with the structure of record contracts, and with the uneven nature of music stardom, than with the amount Spotify is paying to the music industry as a whole.
