Having the option to stream millions of tracks supported by an occasional ad, or free of ads for a small monthly fee, Spotify appeared to be serious competitor to music piracy. Data just released by the Swedish Music industry appears to support this theory.

Through quarterly surveys researchers have polled the music consumption habits of thousands of Swedes between the age of 15 and 74, and in their most recent report they find that music piracy continues to drop.

Since 2009 the numbers of people who download music illegally has decreased by more than 25 percent, and over the last year alone it dropped by 9 percent. The data further suggests that this downward trend is caused by the availability of improved legal services such as Spotify.

When Spotify opened up to the public early 2009, it took only three months before the number of Spotify users had outgrown the number of music pirates. In the months after that the number of downloaders continued to decline while Spotify expanded its user base.

playing in Spotify..

Streaming services such as Spotify are now the most popular way to consume music. More than 40 percent of the participants in the survey now use a music streaming service, compared to less than 10 percent who say they download music legally.

About 23 percent continue to pirate music, but this number is dwindling.

“The long-term trend is a sharp increase in legal streaming while we see a reduction in illegal file sharing and downloading,” Music Sweden’s CEO Elizabet Widlund said commenting on the results.

“When 800,000 Swedes are willing to pay for streaming music, there is clearly a market for more legal players in the digital music market. We encourage diversity of music services as it will provide better conditions for both those who create music and those who listen to it,” she added.

Looking at the motivations for people to switch to legal services, participants in the survey cited “the range of music that’s released” as the primary reason (40%). Other explanations were the absolute increase in available music (30%), and the fact that legal services have become cheaper (24%) and simpler (24%).

Although the above is certainly good news for the music industry, it has to be noted that the ‘change’ to legal services is ‘fragile.’ The survey shows a slight change in the ongoing trend during the second quarter of 2011, exactly when Spotify announced that its free service would have some new limitations.

Although this change motivated some (15%) to sign up with a paid Spotify account, the majority (31%) said they would leave Spotify to turn to other streaming services, like YouTube, or file-sharing sites.

There is no doubt that, unlike music industry bosses have claimed in the past, there are indeed ways to compete with free. However, time is needed to find the right balance between giving music fans what they want, and secure a healthy revenue stream.

Source: Music Piracy Continues to Decline Thanks to Spotify

Having the option to stream millions of tracks supported by an occasional ad, or free of ads for a small monthly fee, Spotify appeared to be serious competitor to music piracy.

In the two years that followed Spotify rapidly won the hearts and minds of many music fans. Currently limited to a few European countries only, the service has already amassed more than 10 million users and over a million paid subscribers. A true success story, which has been recognized by the music industry on various occasions.

What’s often overlooked is that Spotify is in reality one of the largest P2P networks on the Internet. No surprise, since one of the lead engineers from the start is none other than Ludvig Strigeus, the original creator of the BitTorrent client uTorrent. However, not much is known about this private P2P network.

Using P2P technology allows Spotify to use less servers, less bandwidth and have a better up-time. And it appears to be working. In fact, of all the tracks that are streamed over the Internet by Spotify users the majority come via P2P connections. Since they’re dealing with copyrighted music, all transfers are totally anonymous, encrypted and secure of course.

Let’s take a look at some data provided by Spotify on their three main music sources.

As can be seen in the graph above most tracks are played from the local cache. These are songs a user has listened to before, and those files are stored on the local hard drive. Of all the remaining tracks that are played, roughly 80% are accessed via the P2P network.

What’s further notable is that P2P performance is most efficient during peak hours and in the weekend. In the graph provided by Spotify the share of P2P traffic peaks on Saturday evening.

Spotify’s P2P network uses various influences from other file-sharing platforms. It uses both a BitTorrent like tracker and a Gnutella style network, but is specifically tailored towards playing relatively small files. Since it’s dealing with streaming, the first bits of a song are prioritized while slow peers are rejected.

This custom P2P solution guarantees what is one of the most important features of Spotify, a very low latency. Tracks have to start almost instantly, and with a median delay of 265 milliseconds it lives up to this expectation. Quite remarkable for a P2P-powered application.

So finally, there we have it. A massive P2P network that’s fully supported and even partially owned by the music industry. Who ever thought that would happen?

Source: Spotify: A Massive P2P Network, Blessed by Record Labels

The application, which has streaming capabilities partly supported by P2P technology, is being developed by a team that includes uTorrent creator Ludvig Strigeus. Unfortunately, the P2P angle is not appreciated by everyone.

Last week the IT-department of Oxford University pulled the plug on the popular application because it relies on P2P technology.

“Spotify is a music streaming service. It relies on a peer-to-peer system for distribution of content, and its use is therefore forbidden on the University network,” was the explanation given.

Students are outraged by the University’s decision to put a ban on their beloved application. One Oxford student describes the drastic measure as “discrimination against music lovers, adding: “I hoped that it was a technical glitch, and that the university would be able to fix it. I never realized it was against the rules.”

The local IT-manager, however, justifies the move by saying that Spotify “cannot be justified as being educational,” which means that it would be a waste of the tax payer’s money. Not everyone agrees with this assessment.

A first-year music student claims that the application is one of his most valuable research assets. “I use it loads. It’s the most comprehensive collection of classical music in one place. Much better than Naxos,” the student said.

Spotify is partly owned by the major record labels who all bought a stake in the music startup. Sony BMG bought 5.8% of Spotify for 2,935 Euros, Universal Music got 4.8% for 2,446 Euros, Warner Music paid 1,957 Euros for 3.8% and EMI pocketed 1.9% for an investment of 980 Euros.

Neither the labels nor Spotify have responded to the ban in Oxford thus far, but we assume that they are not amused since it was hailed by most users as one of the few competitors to downloading music illegally.

Source: Oxford University Bans Spotify For P2P Use

Unfortunately, the labels themselves are not as enthusiastic as most users are, as they doubt the service’s ability to generate enough revenue.

Indeed, if we take a look at the numbers relating to Lady Gaga that we reported a few days ago, Spotify is barely generating more revenue than most artists make from illicit file-sharing. With an income of only $167 for more than a million plays, he/she is not going to be able to pay the rent.

However, it turns out that this might not be the fault of Spotify’s business model, but rather the involvement of some of the major labels in the project. As reported before, Sony BMG bought 5.8% of Spotify for 2,935 Euros, Universal Music got 4.8% for 2,446 Euros, Warner Music paid 1,957 Euros for 3.8% and EMI pocketed 1.9% for an investment of 980 Euros.

Lady Gaga is signed by Def Jam (Universal) which partly owns Spotify, which probably has a significant impact on the revenue she makes. After all, the major labels wouldn’t pay the artists from their own pockets would they?

This was confirmed recently by Lily Allen who commented on Twitter: “Did you know the major[s] own hold massive stakes in Spotify, and earn advertising revenue at yet another loss to the artist?”

Of course, this diminished revenue wouldn’t be a problem if Lily signed her music up for digital distribution with a service like RouteNote, who offer the full per track rate, and only take 10% on the back end.

In fact, TorrentFreak has heard from various sources that independent distributors can get deals of at least $0.03 per play with Spotify. This adds up to a pay day of $30,000 instead of $167 for a million plays, which suddenly sounds like an altogether better deal.

Source: Spotify Isn’t Ripping Off Artists, The Labels Are

Nevertheless, Uggla insisted that Spotify is a fantastic service with a great range of music to sample. However, he felt that the fact he wasn’t getting paid was the fault of the major labels involved in the project (Sony BMG bought 5.8% of Spotify for 2,935 Euros, Universal Music got 4.8% for 2,446 euros, Warner Music paid 1,957 Euros for 3.8% and EMI pocketed 1.9% for an investment of 980 Euros), claiming that he “earned as much in six months as a BUSKER could earn in a day.”

As the dust settled on the story, many non-Swedish readers were saying “Magnus who?” and wondering if this artist’s lack of mainstream popularity was the real reason behind him earning virtually nothing. But what about big artists? What about really, really big artists with huge international appeal. Say, an artist like Lady Gaga, who has sold more than 4 million albums and shifted in excess of 20 million paid digital downloads?

According to a report today, Lady Gaga’s track “Poker Face” was one of the most popular tracks during a five month period on Spotify and was played more than a million times. So how much money does she get paid by STIM (the Swedish Performing Rights Society) for this massive achievement?

SEK 1150 – that’s around $167 or roughly 113 Euros.

Commenting on the story, Douglas Léon, better known as Swedish rapper Dogge Doggelito, said he was dismayed.

“It is totally sick. We musicians have no rights, you may not charge [for music] anymore,” adding that Lady Gaga could’ve earned more driving an illegal taxi-cab.

Swedish artist, music producer and philosopher Alexander Bard, however, said that this payment was better than Lady Gaga would have achieved from her music being available via The Pirate Bay, noting that the amount was “…more than zero.”

Technically Bard is absolutely right, but let’s be honest – Lady Gaga would blow the money she earned from STIM in a 20 minute hotel mini-bar bender. Looking at the overall downloads, let’s face it, per track she earned pretty much near to nothing from both services.

While Spotify is to be commended for having the guts to try something new, for providing a truly wonderful service and for having achieved such a lot technically in a such a short space of time, one can’t help but wonder if it is ever going to bring in decent money for the artists.

After all, aren’t these the very people the music industry continually holds up as the important ones to encourage, nurture and support?

Lady Gaga’s example shows that Spotify’s business model needs some work, and the labels seem to agree on this. The US launch of the service has been delayed earlier this week, allegedly because of concerns about Spotify’s ability to upgrade free users to paid customers.

“We think Spotify is a great service but they’re going to have to convince us they can convert enough people from free to paid subscriptions to make it worth our while,” one label told the Financial Times. “As an ad-supported service the economics don’t work at all.”

Despite the startup troubles for Spotify the reviews from users, many of which were avid file-sharers, are still extremely positive. The service recently launched an iPhone app that allows users to play the tracks on the go, with or without an Internet connection, which many saw as the missing link. Now all they have to do is come up with a plan to actually make money.

Source: Lady Gaga Earns Slightly More From Spotify Than Piracy

Last week music industry body IFPI requested Niemelä to be taken off the case, since he is connected to the music streaming application Spotify which is partly owned by the major record labels. This request was soon backed by movie industry lawyer Monique Wadsted. “There should not be any doubt in this case,” she said in a response.

The Court today agreed with this assessment and disqualified Niemelä because he holds stock options in Spotify. This despite the fact that Niemelä himself denied a conflict of interest. The decision by the Appeal Court is unanimous and can not be appealed.

The question remains why the music industry was so eager to have this lay judge removed, since they usually keep quiet when the person in question supports their case. However, as we’ve pointed out before, there could be more to this lay judge issue than initially meets the eye.

Niemelä’s involvement with Spotify was limited to the technical side. In fact, he is a tech savvy programmer who co-owns a streaming technology patent along with the original developer of uTorrent and knows the ins and outs of BitTorrent.

Instead of having a bias towards the music industry, as IFPI wanted the Appeal Court to believe, he might actually be one of the rare candidates who knows how BitTorrent really works. Judging from the plaintiff’s discrediting of other tech experts in the previous trial, it might be that IFPI’s true motivation to remove Niemelä was not that humble.

Source: Spotify Connection Disqualifies Pirate Bay Appeal Judge

However, that eventuality was denied after the Appeal Court investigated the bias issue and ruled that the judge’s ties to these groups did not influence his judgment.

Instead of a retrial an appeal has been granted which will take place in November. The case will be handled by judge Ulrika Ihrfelt who was previously removed from the bias investigation of judge Tomas Norström, because she too was linked to pro-copyright groups.

Today there is yet another question mark hanging over the head of another judge scheduled to play a major part in the appeal.

Launched as an answer to the file-sharing problem and the possible savior of the music industry, Sweden’s Spotify music service has been widely well received by both the industry and hardened pirates. But there is a problem.

According to an SR.se report today, one of the lay judges in the case has been revealed as an employee of the fledgling streaming music service.

“If the man is not judged to be biased he will be part of the court’s team at the right time,” said judge Ulrika Ihrfelt.

“I would not say there is a problem, but we definitely consider it a factor to which we must draw the attention of the parties, given that Spotify is a company that provides online music,” Ihrfelt added.

But of course, the problem goes just a little bit further than Spotify simply being a provider of online music. It also counts the major music labels – the absolute arch-enemies of The Pirate Bay – as shareholders.

Both the plaintiffs and defendants in the appeal have been notified of the lay judge’s affiliation with Spotify and it will now be down to the court of appeal to decide if there is a conflict of interest.

Source: Pirate Bay Appeal Judge Faces Ban, Works For Spotify

But where are the alternatives? If someone created a service to compete with pirates, everything could improve. Sites like The Pirate Bay would cease to exist and users would flood to legal services where not only could they avoid being sued, but the artists would get paid too.

It seems that just about everyone who has tried it absolutely loves Spotify. It has in excess of 3.5 million tracks available, all for free (if you chose that option), all funded by advertising. And of course, for those wishing to champion the morality of paying artists, this is dealt with too. This week it was revealed that the major labels all have fingers in the Spotify pie – surely paying the artists would be a foregone conclusion?

Not according to Swedish noble, artist and composer Magnus Uggla, who has launched a scathing attack on the fledgling streaming service, branding it as dishonest.

Writing on his blog he says that Spotify is a really incredible, fantastic service which offers everything – for free too. But, he writes, it’s too good to be true. Like thousands of other artists, Uggla’s work is available via Spotify and, due to involvement of the major labels and a lack of involvement from the local torrent site operators, he of course expects to get paid a reasonable amount. Not so.

Uggla says that when he received his first earnings statement from Spotify it became apparent that he “earned as much in six months as a BUSKER could earn in a day.” Ouch.

Understandably upset, Uggla raised the issue in a long discussion with Sony boss Hasse Breitholtz but came away feeling that he should trust in the man and the service.

However, Uggla was as surprised as most people when he learned last week that the major labels, including Sony, all have a stake in Spotify. A mere 30,000 kroner ($4,000) investment bought the company 5.8% of the service now valued at around 1.8 billion kroner ($251m).

Referring to the valuation, Uggla questions how this company can do so well – and comes to the conclusion that it’s at the artist’s expense. He says that Sony Music, after “suing the shit out of The Pirate Bay” is acting just like them by not paying the artists.

“I would rather be raped by Pirate Bay than by Hasse Breitholtz and Sony Music and will remove all of my songs from Spotify pending an honest service,” he says.

Sony? Dishonest? Surely not…

Source: I’d Rather Be Raped By Pirate Bay Than Go With Spotify

One of the software engineers at Spotify is Ludvig Strigeus, the creator of uTorrent. It is therefore no surprise that the application uses very few resources, just 12k memory when we tested it. The rumor goes that some of the money made when uTorrent sold to BitTorrent Inc., has actually been invested in Spotify, an application that competes with piracy.

When we asked Andres Sehr of Spotify to describe the service, he told us “Spotify is a new way of enjoying music. We believe Spotify provides a viable alternative to music piracy. We think the way forward is to create a service better than piracy, thereby converting users into a legal, sustainable alternative which also enriches the total music experience.”

The quality of the music on Spotify is comparable to 160kbps MP3s, which is more than decent for a streaming application. To fill its library, Spotify has cut deals with EMI, Warner Music, Sony BMG and three other major labels, which all responded positively to the new concept. Interestingly, Spotify also uses P2P technology to stream the more frequently accessed tracks.

“Spotify uses a hybrid p2p system where music is delivered both by our servers and using P2P,” Andres Sehr said. “This allows us to deliver the long tail of music which may not be very popular, as well as quickly serve up the latest hits that the majority of users listen to. P2P allows us to both increase the speed that we deliver music and also lower the cost of streaming it.”

Aside from being a music streaming application, Spotify also allows users to create and share playlists with each other, the top 100 tracks of 2008 according to Pitchfork editors for example. On top of that, the Spotify interface helps you to discover new artists with its “similar artists” and “artist radio” feature.

The overall response from Spotify users seems to be very positive, but can it compete with piracy? Time will have to tell, but Spotify invites are actively being traded within the BitTorrent community, and it has even been well received on some of the most elite music trackers.

One user at the music tracker What.cd wrote: “Honestly it’s going to be huge. I’ve been browsing and playing from its seemingly endless music catalogue all afternoon, it loads as if it’s playing from local files, so fast, so easy. If it’s this great in such early beta stages then I can’t imagine where its going. I feel like buying another laptop to have permanently rigged.”

Spotify is not perfect though. One of the mentioned downsides is that it is not compatible with iPods and other portable MP3 players. The Spotify team hasn’t ruled out the option of an iPod compatible version in the future, but for now they will focus on optimizing the Windows and Mac application.

Overall we can conclude that Spotify definitely has potential, but time will tell if it’s able to compete successfully with piracy. Spotify is currently in Beta stage, invites to the free (ad-supported) version can only be used in the UK, Sweden, Finland, Norway, Spain and France, but restrictions usually don’t stop pirates.

Update: We have a few invites left, please remember though that it’s only available in the UK, Sweden, Finland, Norway, Spain and France. Those who’d like to receive an invite, send me an email with “spotify” as subject. According to some of the commentary, an invite is not even needed though.

Source: Spotify, An Alternative to Music Piracy