The Swedish Experiment: Spotify Helps Recording Industry Make Lots Of Money

Music Industry

from the in-the-pirate-bay's-home-country dept

We’ve mentioned before that Spotify shows how providing consumers what they want can really have a much stronger impact on “piracy” than any enforcement initiative. Both Spotify and The Pirate Bay started in Sweden, and both got tremendous penetration in the Swedish market. But as various studies have shown, infringement of music dropped drastically in Sweden as the service became more popular. A new report looks at the Swedish recorded music market, and found that it’s up an astounding 30.1% in the first half of this year, due almost entirely to Spotify. Digital music now accounts for 63.5% of all music sales, and streaming services (mainly Spotify) represent 89% of all digital music sales. MusicAlly notes that streaming may be cannibalizing downloads, but the massive growth in streaming is more than outweighing the decrease in downloads.

This even has the labels (who, yes, have an equity position in Spotify — more on that in a bit) talking about how they’re making more money than they have in a long, long time, thanks to Spotify:

“We’re back to the same revenue levels as during 2004, and if the development continues in the same way we’ll be back on turnover similar to those during the “golden days” of the CD in just a few years,” says Universal Music Sweden’s MD Per Sundin.

“We’ve seen massive change in music consumption, where music fans are now listening to more music than ever, in an entirely legal environment. This means that revenues are increasing all the time, and artists get paid every time their music is played. Our artists get significant revenues from Spotify, which is our biggest income source for Sweden. A positive side effect is that we’re investing a lot in new talent.”

Mark Dennis, CEO of Sony Music Sweden, makes the same point: “One of the most gratifying consequences of this is that it gives us the opportunity to sign more artists, and record more new Swedish music than ever. In fact, for most of our artists, streaming music now represents the majority of the revenue.”

Now, I’ve learned to take any claims from the major labels with a grain of salt, and there are some clear issues with Spotify. People have complained that the deals favor the majors so they get a larger cut than the indies. That’s definitely a problem. Others insist that Spotify doesn’t pay enough — but multiple studies keep finding that, on a per listen basis, Spotify actually pays quite nicely. There may still be significant issues with how the labels pass that money on to artists, however.

The point of this isn’t to say that “Spotify” is the answer. There are, clearly, some questions about that particular service. But it certainly shows that there are solutions that very effectively compete with free, and as they grow, they can certainly help make significant money for the copyright holders. Spotify, of course, had a head start in Sweden, and the adoption rates there are incredible. However, the point is pretty clear: let new services like Spotify grow and thrive and effectively compete with free, and they will do so — and the business issues seem to pretty quickly sort themselves out. Obviously having even more competition would be a good thing as well, as competitors will keep trying to offer something even better (and put pressure on Spotify to advance as well).

In the end, though, Spotify is a classic case of giving the public what they want, rather than what the industry wants them to have. And yet, in doing so, it’s also now providing massive revenues for the industry — even as people continue to insist that such a result is impossible.

Filed Under: digital music, piracy, sweden
Companies: sony, spotify, the pirate bay