Revenue Neutral


In a new working paper, University of Minnesota economist Joel Waldfogel and Luis Aguiar of the Institute for Prospective Technological Studies in Seville, Spain, estimate how Spotify has affected both music sales and piracy during its fast expansion across the globe. Their method: comparing countries where the service grew rapidly between 2013 and 2015, and those where it didn't. The upshot? According to the authors' calculations, Spotify does seem to have put a damper on piracy, but it's also displaced some digital sales (neither is exactly a shocker). Add it all up, then factor in the payments Spotify itself is sending to labels, and the effect appears to be roughly "revenue neutral" for rights holders. They don't make any more money. They don't make any less.

If these findings hold up (again, it's just one working paper), it should put the ongoing debate about Spotify's treatment of artists into some new perspective. If the platform's business model hasn't shrunk the total pie of cash being divvied up by rights holders, but some artists really are seeing their paychecks shrink, it suggests the problem (insofar as one exists) has to do with the way record labels are distributing the cash.