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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Cazzette launch career exclusively on Spotify

High-profile artists like Adele, Coldplay and Taylor Swift have withheld albums from Spotify and other streaming music services in recent times, but hotly-tipped Swedish duo Cazzette are going the other way: their debut album ‘eject’ will ONLY be available on Spotify.

Having made their name with remixes of tracks by Avicii, Swedish House Mafia and David Guetta (oh, and Adele), Sebastian Furrer and Alexander Björklund have chosen to launch their recording career exclusively on Spotify.

‘eject’ will be made available in three “content sets” on Spotify, with the first going live next week with six songs, then three more tracks in December, and three more early in 2013. They’ll be delivered through Cazzette’s own Spotify app, as well as through embedding deals with media partners.

The plan is the result of a partnership between Cazzette’s management company At Night Management and Spotify. Manager Ash Pournouri talked to Music Ally about the rationale behind the decision.

“I’ve been a big fan of Spotify since its launch,” says Pournouri. “As soon as it hit, I thought it would be one of the dominating platforms for me as a user. As soon as we got in touch and started talking [professionally] we were on the same path, and thinking along the same lines.”

As the manager of a more-established Swedish dance artist, Avicii, Pournouri saw the impact that Spotify is having in its native country, where it’s become the largest income stream for a number of artists and labels, even ahead of iTunes.

With Cazzette and ‘eject’, the strategy is to think of the album as, well, less an album and more a playlist. “We have the possibility to release an album in a playlist that’s updated all the time,” says Pournouri.

“You can subscribe to the album, and it could be three tracks, or it could be 300 tracks potentially. We can update the album as we go along. Right now, the album is 12 tracks, but it could definitely end up being more than that.”

Cazzette are currently not signed to a label, and control their own rights: something Pournouri says gives them the flexibility to try this kind of experiment.

“It leaves us the freedom to be creative and not having to think about having an immediate return on investment,” he says. “We can think long-term, and focus on the launch of the career.”

Cazzette will still be making money from their Spotify deal through per-stream payments, with the artist taking a bigger cut of the revenues than they would if signed to a label deal.

Streaming payouts have been controversial in recent months, to say the least, with a number of artists unhappy with the money they’re getting from Spotify and its rivals compared to traditional download and CD sales.

When asked about this debate, Pournouri prefers to compare Spotify to alternatives like SoundCloud and YouTube, which he says will make far less money for an artist like Cazzette.

That said, Cazzette will still be using other services, including SoundCloud, YouTube, Facebook and Twitter. Spotify may be the exclusive distribution channel for the ‘eject’ album for now, but it will slot into the wider digital marketing activities around the music, and the duo’s touring plans.

One drawback to this kind of deal is the fact that Spotify is only live in 15 countries. As the sole distribution platform for ‘eject’, that means fans in a lot of countries won’t be able to stream the album.

“We tour the world, and obviously we’ll be in countries that don’t have Spotify,” says Pournouri, noting that Cazzette will also still be making singles available through videos online.

“In the markets where Spotify doesn’t exist today, it’s not that we can’t work with others,” he adds. “We’ve decided to stay exclusive to Spotify for the launch of their career, though.”

One potential risk: Apple. Or rather, what Apple will make of Cazzette’s decision to launch their career exclusively on Spotify, and what this means for the duo’s chances of getting iTunes promotion in the future.

Still, the marketing support offered by Spotify, the prospect of spreading the word about Cazzette through Facebook sharing, and perhaps even the prospect of charting in countries where streaming contributes to the music charts, clearly persuaded Cazzette and At Night Management that the risk was worth taking.

“Their management recognises that this is both a marketing platform and a sales platform,” Will Hope, director of label relations at Spotify, tells Music Ally.

He also thinks the partnership signifies a wider trend of EDM artists and labels warming to Spotify as a platform. “I feel the tide turning. Just because of the tastes of the people that initially took up Spotify, it was seen as having an indie-pop skew,” he says.

“But we have a lot of EDM fans on the service, and lots of labels are recognising how it fits into their online strategy. They’ve got a highly engaged group of fans who are really tech-savvy, and just want to be consuming things all the time.”

If Cazzette’s content sets are successful on Spotify, more new artists may follow. And if the streaming service wins a reputation for being able to break new music worldwide – well, in 15 countries at least – it will have some more ammunition for that heated debate over artist payouts.

Pournouri is certainly fighting Spotify’s corner. “Streaming is the future: it’s where it needs to go,” he says. “I’m a big ambassador for that technology.”

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