Use of Spotify causes a reduction in legal sales of digital downloads as well as a reduction in the amount of illegally downloaded music, according to a recent report from the European Commission. The net effect of the two is about neutral, meaning they cancel each other out, therefore creating no significant impact on music industry revenue.
The study was performed by the European Commission's Joint Research Centre. The European Commission is the executive body of the European Union and represents the interests of the EU as a whole, as opposed to the individual countries of which it consists. Among the duties of the EC are proposing legislation and enforcing European law, so the results of its research division studies could potentially have widespread implications in the region.
Researchers Joel Waldfogel and Luis Aguiar compared the number of Spotify streams to both the number of legal downloads and the number of illegally pirated tracks for 8,000 individual artists. They concluded that, for every 47 streams on Spotify, one less illegal download is committed.
The conclusion bolsters the previous claims of Spotify's CEO Daniel Ek, who has stated that Spotify use helps counter piracy.
"This piracy displacement is consistent with Ek's claim that Spotify's bundled offering harvests revenue from consumers who — or at least from consumption instances — were previously not generating revenue," the report concludes.
Streaming tracks on Spotify has a similar impact on legal sales of songs available for digital download as well, however. The report states that, for every 137 streams on Spotify, the number of sales of that same track via digital download decreases by one.
After crunching the numbers, considering the revenue generated from each stream and each digital download sold, the overall impact is negligible, the study concludes.
"Given the current industry's revenue from track sales ($0.82 per sale) and the average payment received per stream ($0.007 per stream), our sales displacement estimates show that the losses from displaced sales are roughly outweighed by the gains in streaming revenue. In other words, our analysis shows that interactive streaming appears to be revenue-neutral for the recorded music industry," the report states.