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Spotify may not be that bad for the music industry, after all

Earphones are seen on top of a smart phone with a Spotify logo on it, in Zenica February 20, 2014. Online music streaming service Spotify is recruiting a U.S. financial reporting specialist, adding to speculation that the Swedish start-up is preparing for a share listing, which one banker said could value the firm at as much as $8 billion (4 billion pounds). REUTERS/Dado Ruvic (BOSNIA AND HERZEGOVINA - Tags: SCIENCE TECHNOLOGY BUSINESS SOCIETY) - RTX1971J
Reuters/Dado Ruvic
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By Ashley Rodriguez
Published Last updated This article is more than 2 years old.

Despite all the fuss about Spotify’s streaming-music model—and its potential for slashing artist royalties—it looks like Spotify isn’t hurting the music industry after all.

But it’s not exactly helping it either, suggests a new working paper published this month by the National Bureau of Economic Research.

Economists from the University of Michigan and the Institute for Prospective Technological Studies in Seville, Spain, analyzed Spotify streams from 2013 to 2015 in regions around the world where adoption of the service was growing rapidly and areas where it wasn’t. They then compared those streaming numbers with sales and piracy data from 2012 to 2013 in order to gauge how the streaming service was impacting local recording-industry revenues.

The results: Yes, Spotify is devouring sales of music downloads with its “free,” ad-supported and paid streaming services, according to the paper. And it might be setting a precedent that listeners don’t have to pay for music, as critics, including US pop star Taylor Swift (paywall), who pulled her catalog from the service, have pointed out.

But those lost sales are being canceled out by gains in streaming revenue. As Spotify has argued, it’s cutting down on music piracy and converting listeners who might not have otherwise bought music into joining its paid platform.

So, at the end of the day, Spotify’s impact on music-industry revenue is minimal, the report shows.

To be sure, there are other matters of debate around how streaming music is impacting music revenue, and artists royalties, in particular. But this report is a useful attempt to measure the effects of streaming music on sales.

“Revenue generation from recorded music is shifting rapidly from the sales of individual tracks (and albums) to bundled sales of streams,” the paper argues. “As this transition continues, understanding the relationship between streaming and sales will be crucial to both our understanding, as well as the operation, of the recorded music industry.”

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