Streaming music services have killed piracy in Norway

Streaming music services have killed piracy in Norway



For years, one of the most common arguments used against restrictive DRM and consumer-unfriendly policies in the music business has been that digital rights management technologies are partly to blame for rampant piracy and revenue loss. The modern roots of this argument are as old as Napster — when music first began to be distributed online, the music industry reacted by aggressively attacking every illegal service while refusing to negotiate with legal companies to create services consumers would actually want to buy. Now, new data from Norway suggests that piracy and availability are linked, but unfortunately, that may be cold comfort to the worldwide music industry as a whole.

First, a bit of background. Six years ago, piracy rates in Norway were sky-high, as they’ve tended to be everywhere around the world. As the streaming industry has taken off, those piracy rates have nose-dived in a particularly dramatic fashion.



According to data published by Music Business Worldwide, piracy rates in Norway have fallen to just 4% for people under 30. The report identifies the principle reason why — young people have led the charge in transitioning to streaming services.


Streaming sales are the bright spot in the music industry, but ominously, they’ve already begun to cannibalize the existing digital infrastructure. Sales of music through iTunes fell 13%, CDs fell 15%, while streaming income (and vinyl, for what it’s worth), both rose by significant amounts.

The challenges of the streaming transition

The streaming transition may be killing music piracy and validating the general position of the anti-DRM crowd, but there are significant challenges associated with the new distribution model. First, even under the high-royalty model that companies like Spotify have lobbied to overturn, the average artist makes about seven-tenths of a penny per play. This presents profound challenges for any artist — challenges reflected in the way that the top 1% of artists capture an increasingly large percentage of total music income.



The latest data from Midia Research suggests that far from being a long tail distribution, the musical industry is a superstar economy in which 1% of all stars swallow a total 77% of the revenue. Streaming models only exacerbate the problem — an indie group selling CDs at a local concert can expect to earn much more revenue per disc than they will earn if consumption moves primarily towards streaming sources.

Other trends within the Nielsen report confirm this move towards a lopsided distribution. 2014 was the first year since 2005 in which two albums broke the 3.5 million mark, but just four albums broke the one million mark, compared to 13 in 2013.

In other words, the music industry continues to suffer from cratering CD sales, streaming profits aren’t enough to support the vast majority of indie artists, superstars are vacuuming up what profit still exists in the industry, and currently royalty structures from streaming sites, despite being decried by ruinous by the sites themselves, materially don’t generate enough income for the 99% of people who aren’t Taylor Swift or Justin Bieber.

It’s easy to dismiss this with “F*** the RIAA,” but at a certain point the discussion has to turn round to the difficulty of making a living in the music business. With only a tiny fraction of Spotify and Pandora subscribers actually paying for the service, the growth of streaming isn’t automatically reason to cheer. Say what you will about iTunes or services like it, they turned a profit once they operated. When the increasingly dominant means of music distribution pays too high a royalty to operate profitably but too low a royalty to allow most artists to live on the results, something has to give. The music industry is still grappling with the change from physical to digital distribution — and now it’s being eaten by another.