NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Streaming Reaches Flood Stage: Does Spotify Stimulate or Depress Music Sales?

Luis Aguiar, Joel Waldfogel

NBER Working Paper No. 21653
Issued in October 2015
NBER Program(s):Industrial Organization, Law and Economics

Streaming music services have exploded in popularity in the past few years, variously raising optimism and concern about their impacts on recorded music revenue. On the one hand, streaming services allow sellers to engage in bundling with the promise of increasing revenues, profits, and consumer surplus. Successful bundling would indeed translate some of the interest in music not generating revenue through individual track sales - unpaid consumption and deadweight loss - into willingness to pay for the bundled offering. On the other hand, streaming may displace traditional individual track sales. Even if they displace sales, streams may however still raise overall revenue if the streaming payment is large enough in relation to the extent of sales displacement. We make use of the growth in Spotify use during the years 2013-2015 to measure its impact on unpaid consumption and on the sales of recorded music. We find that Spotify use displaces permanent downloads. In particular, 137 Spotify streams appear to reduce track sales by 1 unit. Consistent with the existing literature, our analysis also shows that Spotify displaces music piracy. 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.

download in pdf format
   (278 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w21653

Published: Luis Aguiar & Joel Waldfogel, 2017. "As streaming reaches flood stage, does it stimulate or depress music sales?," International Journal of Industrial Organization, .

Users who downloaded this paper also downloaded* these:
Waldfogel Digitization and the Quality of New Media Products: The Case of Music
Shiller and Waldfogel w15390 Music for a Song: An Empirical Look at Uniform Song Pricing and its Alternatives
Waldfogel Music Piracy and Its Effects on Demand, Supply, and Welfare
Aguiar and Waldfogel w22675 Quality Predictability and the Welfare Benefits from New Products: Evidence from the Digitization of Recorded Music
Mortimer, Nosko, and Sorensen w16507 Supply Responses to Digital Distribution: Recorded Music and Live Performances
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us