When Taylor Swift pulled her music from Spotify earlier this month, she brought the high-watt media glare onto a question that's dividing the industry: do on-demand services shrink the pie by turning music buyers into streamers, or do they grow it by extracting revenue from those who were stealing music online instead of buying it?
The latter argument has long been predicated on the belief that people who use file-sharing services never pay for a CD (or an MP3, or a movie for that matter). Surveys have long shown, however, that illegal downloaders aren't so easily categorized. In fact, they may be more active buyers of music and movies than the typical consumer.
The latest evidence comes from San Francisco-based BitTorrent Inc., the company behind the world's most popular file-sharing software. BitTorrent is the protocol of choice for illegal downloaders across the planet. Nevertheless, BitTorrent Inc. has been trying to persuade bands, labels, filmmakers and other content publishers to use its software as a platform for legitimate distribution. It recently added the ability to sell bundles of content globally, with Radiohead's Thom Yorke being the first to deploy the technology.
On Thursday, the company released the results of a global survey of 2,500 randomly sampled BitTorrent users, showing them to be more willing to open their wallets for content than the average consumer. The company concluded that for all the buzz about streaming, content sales are far from dead.
"We've heard that if it's not free on demand, then it won't be heard. Our users, representing a broad, global youth audience, tell us otherwise," wrote Straith Schreder, BitTorrent's director of content strategy. "Fifty percent of them buy music each month. Fifty-two percent of them buy films monthly. They buy more digital albums than they do digital singles. They seek out shows and theaters.
"Streaming may be inevitable. But what we're seeing from fans is a desire for substance: for more, and more meaningful, ways to connect to their favorite artists."
Granted, they're not spending as much on average as a Spotify premium subscriber, who pays about $120 a year for the ad-free version. Respondents to BitTorrent's survey said they spend $48 per year on music, on average, with 30% spending more than $100. All the same, the average is $48 more than one-third of U.S. consumers, who don't spend a dime on music. It's also almost twice what Spotify says is the U.S. average ($25 per year).
The survey also found that BitTorrent users were more likely to pay for music than the typical Internet user. According to the company, 76% bought downloadable songs or albums in the past six months, compared to 28% of Internet users generally. In addition, 16% of BitTorrent users have a paid account with a music subscription service such as Spotify, compared to 2% of all Internet users.
A few more stats about BitTorrent users and music: 45% have bought CDs in the past year, 44% have bought digital albums, 32% have bought digital singles, 26% have gone to concerts, and 15% have bought band merchandise. There's a similar level of interest in movies: 47% had gone to see movies in theaters, 38% had bought DVDs or Blu-ray discs, 23% had subscribed to an online movie service such as Netflix, and 23% had bought a downloadable movie.
It shouldn't be surprising that the people who use BitTorrent have a larger-than-average appetite for music and movies; BitTorrent is, after all, a platform for sharing content. The surprise, if there is one, is that they don't satisfy said appetite just by downloading music and movies for free.
Which brings us back to the question at the top of this post. The BitTorrent survey suggests that file-sharers are, contrary to conventional wisdom in the entertainment industry, fans of above-average intensity who are, in fact, buying music and movies even as they download bootlegged copies for free. That means the real challenge for the industry may not be to extract revenue from BitTorrent users, but rather to monetize the far more casual fans who aren't downloading or streaming anything.
Opponents of free on-demand streaming services (including Swift and her label, Big Machine Music) see them undermining the value of music and threatening sales. And they probably are doing a bit of the latter by providing some fans with a perfect substitute for music purchases.
But as supporters note, the free tier pioneered by Spotify enables the industry to derive revenue from casual fans and incidental listeners who simply won't pay for recordings. The more households Spotify and rival services sign up, the more they will be reaching into this group.