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A new study by NARM and The NPD Group says Spotify discourages record sales
Record label distributor STHoldings, a U.K.-based indepdent music distributor, has pulled its catalogue of more than 200 music labels from online streaming services Spotify, Rdio, Simfy, and Napster, in the wake of a damning report by the National Association of Recording Merchandisers (NARM) and The NPD Group. The report raised concerns for STHoldings that services like Spotify "cannibalise the revenues of more traditional digital services."
Of the music labels under the STHoldings umbrella, 238 complied with their decision while only four small'ish labels opted to remain with Spotify, one of the leading streaming music sites in the world, with 10 million users in Europe and between two and four million in the U.S.
STHoldings' labels focus mostly on techno, dubstep, and bass musical genres, almost all being independent recording artists. One might say it's a small amount for a music site that's growing like gangbusters and has serious funding to fuel its future. Launched in Europe on 2008 and then brought to North America in summer of 2011, Spotify has received a total of €185 million in funding from such investors as Kleiner, Perkins, Caulfield, & Byers; Sean Parker; Wellington Partners; and Northzone Ventures, among others.
Spotify has access to a very large percentage of licensed music, having made deals with Universal Music, Sony BMG Music Entertainment, EMI Group, and Warner Music Group. STHoldings represents a very small percentage of the music offered at Spotify. The pulling of its catalogue is significant only in that it confirms the suspicion of some that independent recording artists are not being properly compensated by sites like Spotify.
Will STHoldings be only the first distributor to pull their independent music catalogue off of Spotify, et al? After all, the study suggests that sites like Spotify are discouraging music sales. Defenders of Spotify claim that discovery of new music is an important part of the process of music purchasing, but this new study suggests otherwise.
In the study, music listeners were grouped into five demographics to rate their engagement with music trends, ranging from "Committed, through "Convert," "Comfortable," "Casual," to the least engaged, "Content." Findings showed that across four of the five demographics, all except "Content," having access to music proved "most detrimental" to the monetization of music recordings.
Also telling, the top-two engaged demographics ("Committed" and "Convert") were asked to answer along an array of agree/diagree responses to the statement, "Because I have access to specific music wherever I am, I feel less of a need to own it." These two demographics answered this prompt in the "Agree Completely" and "Agree Somewhat" boxes, 46% of the time for "Converts and 37% of the time for "Committed."
"As a distributor we have to do what is best for our labels," said STHoldings in a statement. "The majority of which do not want their music on such services. They provide poor revenue and have a detrimental affect on sales. Add to that, the feeling that their music loses its specialness by its exploitation as a low value/free commodity."
STHoldings' release also quoted one of their labels, saying "F*ck Spotify."
The study also found that AM/FM radio and suggestions from friends and family are the most common venue for music discovery, with television also factoring importantly. Retail outlets have declined since 2007 as venues for music discovery, and people that shop for music in physical retail outlets are more likely to have discovered the music they buy from other sources.
Spotify responded to one news source by making the point that Spotify was referenced nowhere in the study itself, and in fact had only been launched in the U.S. for a few days at the time the study was carried out.
[Image Source: Digital Music News]
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