Stream or Be Pirated Spotify Economist Says

(The Register)A study by economist (and occasional Reg contributor) Will Page sheds new light on the relationship between streaming services and piracy. Artists who withhold from Spotify may suffer from increased piracy, he finds. Since Page works for Spotify, the words of the great prophet M'andee-rice Davies spring to mind - but it's worth a read nonetheless, as there’s a lot of new research here.

The report took seven months to prepare, long before this week's row about artists' royalties. It uses sales data, Spotify streaming and Bittorrent traffic to try and untangle the relationships. Page examined the Dutch music market, where Spotify has become a popular legal alternative to freetardery, and he examines the illegal consumption of popular recordings that artists have withheld from the service. In recent years names including The Black Keys, ColdPlay and the Adele have held back from offering their new recordings via the service, arguing that they'd rather have pounds in the pocket for an in-demand recording, rather than the pennies Spotify pays out. Page also looked at Italy, where licensed services are immature (Spotify has only just launched) and piracy is rampant.

The study concludes that legal services have a significant effect on unlicensed music downloads - which has been noted before - but hardcore pirates remain. The Swedish record industry saw a sharp decline in revenues from 2002 until 2008 when Spotify launched. A third of the Swedes over the age of 15 had downloaded pirate material in 2008, but by 2012 it was just over one in five. They’d got out of the habit. Since unlicensed TV and movie downloading increased during this period - when there were few legal alternatives - it's reasonable to conclude that legal services reduce piracy.

As with previous research, the numbers show a large "passive" population and a small number of hardcore, high volume pirates: 10 per cent of freetards download 52 per cent of the unlicensed files. Freetards also tend to go for the most popular files, which helped inform the next research: the correlation between withholding and piracy.

One Direction's album, which was available on Spotify on the day of its release, had a sales to piracy ration of 3.79 copies sold per Torrent download, while hold-out Rihanna sold 1.36 copies per Torrent. Page warns against inferring too much, because some artists allow Spotify to stream singles, while withholding albums. But he concludes "there is no evidence holdouts sell more". In contrast to Holland, where music piracy is something done by angry blokes who don't wash very often, unlicensed downloads in Italy are fairly mainstream. The music industry was slow to develop legal services there.

And it’s still pretty dozy about responding to demand. Page also finds a sharp, short-lived spike in piracy for specific acts after music festivals, an invitation for the industry to respond the demand with discounts and promotions. These are standard practice in other retail sectors - but when it comes to selling digital music, but you’ll look for them in vain.

The conclusion might not be surprising, as Spotify wants to reassure nervous labels and artists that their long-term interests benefit from a relationship with Spotify.

But Page concludes that policy makers should do more – it isn’t spelled out how – to nurture legitimate businesses from pirate sites. Those are corporations too, he reminds us, and they murder the market for legitimate sites – the ones who actually pay the artists.

“Copyright infringing websites are big businesses … 2/3 of piracy sites have advertising, and 1/3 also include credit card logons. This competition is real: consider how ad pricing is distorted by those unlicensed sites who offer more scale and no content costs.

At which point it would have been useful to study another variable – the effect of copyright infringement threats. The cumbersome French apparatus of Hadopi may not have suspended many freetards, but the mere threat created a huge surge of subscribers for Deezer, a Spotify-like streaming service. Britain’s bureaucrats are rigidly against implementing any kind of infringement penalties, no matter how gentle, but this looks increasingly hard to justify given how beneficial penalties are for the legitimate market.

You can read the report here. It’s commendable for its clarity, a quality not always associated with economists.

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Minnesota Woman Ordered to Pay $222,000 in Music Piracy Case ~Rollingstone

(Rollingstone) A federal court has reinstated a $222,000 damages award against a Minneosta woman accused of illegally downloading 24 songs, Reuters reports, handing the music industry a victory in a case stretching past its sixth year.

The U.S. 8th Circuit Court of Appeals in St. Paul, Minnesota, rejected Jammie Thomas-Rasset's argument that the fine – $9,250 per song – was excessive and violated her due process rights under the Constitution. She has said her ex-boyfriend or two young sons were probably responsible for downloading the songs.

The court's decision was the latest step in the music industry's lengthy battle against Thomas-Rasset. She was one of 18,000 people the Recording Industry Association of America sued between 2003-2008 in an attempt to discourage people from downloading songs from filesharing sites like Kazaa. Although the RIAA had initially accused Thomas-Rasset of downloading more than 1,700 tracks, the industry group sued her on behalf of six record labels in 2006 over two dozen songs.

She lost her first trial in district court in 2007 and was ordered to pay $222,000, though the verdict was thrown out over faulty jury instruction. The jury in her second trial awarded the record labels $1.92 million in damages, an amount the court reduced to $54,000.

The record companies exercised their right to a new trial and won $1.5 million from a third jury, an amount the court again lowered to $54,000. The labels appealed, and a three-judge panel of the 8th Circuit unanimously reinstated the original $222,000 fine from her first trial.

Thomas-Rasset's lawyer called the judgment "punitive" and said he would likely appeal the case to the Supreme Court. The RIAA applauded the decision, saying it was "looking forward to putting this case behind us."

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