Music Industry Lures ‘Casual’ Pirates to Legal Sites
If those low-level copyright cheats could be converted to using legal music services, the digital music business would get much-needed help.
Over the past year, however, as sales of CDs have continued to fall and paid-for downloads from services like Apple’s iTunes have fallen short of hopes, record companies have moved to embrace casual file-sharers.
“Consumers are doing exactly what we said they would do,” said Steve Purdham, chief executive of We7, a service that says it has attracted two million users in Britain in a little more than half a year by offering unlimited access to millions of songs.
The music industry has high hopes that the growth of sites like We7, whose investors include the former Genesis musician Peter Gabriel, can change the reputation of Europe as a hive of digital piracy.
Last week, Microsoft said it, too, planned to offer a music streaming service in Britain, via its MSN Web business, though it provided few details.
Meanwhile, the survey by two research firms, Music Ally and Leading Question, showed that Britons were adopting such services in large numbers.
The survey showed a striking decline in the number of British teenagers who said they had regularly engaged in unauthorized file-sharing;
Music industry executives say that does not mean the piracy problem has been solved.
Still, executives say there are some promising signs.
Spotify says it has two million registered users in Britain and another two million in Sweden, Spain and France.
While Pandora has said it expects to be profitable by the end of the year, analysts say most other free streaming services are still losing money.
“You only have to use these services for a while to realize that there’s not a lot of advertising on them,” said Paul Brindley, chief executive of Music Ally.
To try to supplement advertising income, Spotify offers users a premium service, priced at £9.99, or $16.32, in Britain, which eliminates advertising.
Mr. Brown declined to say how many users were upgrading to the premium service, but added:
Over all, he said, revenue has doubled every month since the company began its commercial operations in Britain in February.
Costs are rising, too, because Spotify and similar services pay royalties to rights holders, including music companies, every time a track is streamed.
Those payments are turning into a promising revenue source for the record companies.
In Sweden, a market where piracy has been rampant, Spotify is already the biggest digital revenue earner for Universal Music, even though it has been operating for less than a year, said Mr. Wells, senior vice president of Universal’s international digital operations.
Analysts say record companies have agreed to reduce licensing costs slightly in recent months, with the typical going rate dropping to about 0.8 cent a track from 1 cent a track.
“Now they have to turn these into sustainable businesses,” said Dan Cryan, an analyst at Screen Digest in London.