Music streaming services are actually helping to boost revenues from other sources, such as downloads, according to new research from NPD Group that flies in the face of the idea that services such as Spotify are cannibalising download revenues. The report, seen by Digital Music News, found that 38% of Spotify’s free users in the US, who can stream unlimited music in return for listening to ads, have paid for a song download in the past three months, compared to just 17% of people that don’t use music streaming services at all.
"I can tell you that we see Spotify [free] users more than twice as likely to be buying digital downloads compared to non-users,” says NPD analyst Ross Crupnick.
Spotify has won over consumers and the music industry alike with its music streaming service, which offers free ad-supported listening as well as monthly subscriptions. However, getting the music labels on board has been a struggle, with the firm taking more than two years to launch in the US due to protracted rights negotiations. One key factor that appears to have swung it for Spotify is its claim that it can get consumers that previously pirated music to pay. If it can also prove that it is making money from non-paying users via downloads, this should further its cause.
Despite the positive signs for the music streaming industry, services such as Spotify remain a niche, with the firm attracting just 4m paying members across the 15 markets where it is active. While Spotify’s growth is far faster than music services in the past, such as imeem or Rhapsody, it remains a niche proposition, with analysts beginning to question whether it will ever be mainstream. There is also an argument that the first users of Spotify in the US are likely to be music enthusiasts, willing to fork out for streaming services, downloads and concerts. As it spreads beyond these people into the wide population, there are questions over how many will be willing to pay either for downloads or the streaming option when they can listen for free with ads. Separate research from NPD shows that downloads still dominate the US digital music market, with iTunes alone accounting for 64% of sales.
“Despite increased usage of streaming radio and on-demand services, the market for digital ownership is still growing as the market evolves from the desktop to the pocket,” says Crupnick.