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Spotify: Panacea or Plague?

January 19, 2012

I recently blogged about how Spotify opened up their code to app developers and will be able to offer many of the things that people want when experiencing music.  But, the news isn’t necessarily all good.

A big debate right now is whether legal streaming of music -on services like Spotify- is good for the industry or not… and whether it is good for individual artists or not (these are not necessarily the same question!).  Coldplay recently refused to release their newest album on Spotify, hoping instead for people to buy the album.  Adele did the same.  And a number of independent labels removed all of their content from Spotify.

There are a number of long-term questions here worth asking about whether the move to streaming is inevitable (do people want to own music anymore?) and whether the music industry can continue to exist in that form.  Currently artists seem to get a much smaller profit margin out of streaming than legal sales, although streaming in the U.S. is still a small fraction of the market and one cannot compare the profits from a single instance of streaming to the profits from a sale (a purchased file is listened to many times).

What I’m interested in is perhaps more short- or medium-term right now… as services like Spotify are adopted more widely, does this lead overall to more or less music purchasing?  It may lead to less because streaming is a substitute for buying.  But it may lead to more because streaming is also a complement – people who stream music are exposed to more music, can sample songs they like, and may pass on information to their friends.  And people who choose to stream legally have chosen to do so instead of acquiring the music through illegal filesharing.  I think it would benefit music labels to have an answer to this question as they consider whether to license their music out to various new services.

More to come as I begin to research this question…  Thoughts?

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