With the debate over Spotify’s free tier getting louder and louder, the biggest torrent and music-piracy news website on the Internet felt compelled to weigh in. On Sunday, one of the editors of Torrentfreak published an editorial titled "Killing Spotify's Free Version Will Boost Piracy." The piece sounded an ominous tone to say the least.
"Killing the free version will be a dangerous move," the editorial reads. "It’ll be a step backward that is likely to increase piracy in the long run."
Over the past few months, free has become a hot topic in the music industry. Apple is reportedly pressuring its major label partners to make Spotify abandon the free tier of its service, and evidence continues to mount that advertising revenue is not yet capable of delivering profits for digital streaming services. Pandora, the world’s biggest streaming radio service, has never been profitable, and the income Spotify earns from 60 million people using free versions of its service amounts to less than 10 percent of its annual revenues.
While it’s not a huge moneymaker for Spotify, the company stands by its free offering and its ability to convert free users into paying subscribers; 80 percent of its 15 million paying subscribers, Spotify says, started out as free users.
Not all the labels feel that the free tier should be shuttered just yet, either. “This is a segment of the music industry that’s growing incredibly quickly,” Merlin CEO Charles Caldas told International Business Times last month. “'Free bad, paid good’ is an incredibly blunt and stupid way to look at this."
Ever since Spotify first launched in Europe in 2008, the music industry has watched closely to see if the service might curb music piracy, which had grown into a global problem costing the industry hundreds of millions of dollars a year.
Seven years later, it could be argued that Spotify has helped ease the trend, and indeed the company has been making that case. The company's head of economics, Will Page, published a study in 2013 showing that music is the only media category less pirated today than it was eight years ago. A separate study conducted by market research firm NPD Group found that half the people who stopped downloading music illegally in 2012 did so because of the availability of services like Spotify.
But it's difficult to say whether these positive developments can be attributed to the free tier. The International Federation of Phonographic Industries concluded that pirates were 100 percent more likely to pay money for music subscription services than regular consumers. Further clouding the picture is the fact that Spotify's free tier has changed its shape many times over the years since it launched. It began as a kind of metered service that allowed users to use Spotify for 10 hours every month. Today, it is an ad-supported service on desktop computers, and a kind of radio-style service on mobile devices. Its listeners use Spotify on mobile and desktop devices at about the same rate.
As the company's free tier has evolved, it has continued to help Spotify, whose subscriber growth appears to be accelerating. After spending nearly four years getting to 4 million subscribers, it took barely two months to get from 12.5 million to 15 million.
But whatever role free plays in the music industry's move toward streaming, it has to hope piracy stays far away. The Recording Industry Association of America spent millions of dollars combating piracy at the beginning of the 21st century, and by almost any measure it was a poor investment: more than $17 million worth of litigation fees brought less than $400,000 in settlements in 2010, and the amount of music pirated during that period actually increased.