Two thirds of people don’t download unlicensed music at all, it’s a minority pursuit. But that “honest” mid-market is not only losing the habit of buying CDs, it hasn’t acquired the habit of buying digital songs either. NPD found that between 2007 and 2009, about 24 million Americans stopped paying for music in any form.

The number paying for digital song downloads fell year on year in 2009, the analysts estimate, by 600,000 to 34.6 million. None of this is particularly surprising – and gives impetus to the call that the music business start treating the public as customers again.

But what really put the cat amongst the pigeons was a comparison between free streaming services such as Spotify and on-demand radio services, such as Pandora. Spotify is the major labels’ darling: they invested in it, hold potentially lucrative shareholdings, and gave it preferential royalty rates to get it off the ground. Yet when people joined a streaming service it led to a 13 per cent decrease in paid downloads. Interestingly, NPD found that paid downloads by Pandora listeners increased 41 per cent. Why the difference?

“More listening just means more listening and tends to lead to less purchasing,” reckoned NPD’s Ross Crupnick.

Spotify wasn’t mentioned by name by Crupnick, it hasn’t yet launched in the US, and NPD only looked at US consumers and services. It should also be noted that Spotify has a “paid” option, as well as a link to purchase downloads. Yet, as we revealed last year, the conversion rate from free to paid was a third of what Spotify was boasting.

One major label refusenik is showbiz veteran Ed Bronfman, who runs Warner Music: he’s wary of cannibalisation and suspicious of rival Universal constantly talking up its investment in Spotify. NPD’s research has given him the ammunition he’s been looking for.

The argument for free streaming services is that they bring people in from pirate territory, a more subtle form of “behaviour change” than hitting them over the head with a hammer. This is the case put by We7, which targets a young demographic. But for hardcore music fans, who were pretty happy buying CDs in big numbers, Spotify gives them every justification for spending money on something other than music. Maybe the roof needs fixing.

…Read more at The Register

Move over Fifty Quid bloke – and make way for 14p man.

Statements seen by The Register indicate that’s all the hit music service Spotify makes per user from its advertising-supported business. The difference is the middle-aged spender coveted by the movie, games and music businesses plunks down £50 per week – but Spotify earns its 14p per user per month.

The figures – which we can disclose for the first time – make for interesting reading. They confirm Spotify’s explosive growth – topping half a million registered users in the UK in May from a standing start in January.

But revenues at this stage are negligible. Advertising income was just over £82,000 last month, hence the 14p figure. We can also reveal that despite the phenomenal growth, the takeup of the tenner-a-month subscription program is small, and as a percentage of users, is falling.

Fewer than 17,000 UK users were signed up to Spotify Premium in May, an increase of 2,700 over the previous month – despite the service adding 170,000 registered members overall.

It’s early days for Spotify, and its potential is largely untapped. Spotify has yet to make its Premium service compelling; currently, it merely removes the already-unobtrusive advertisements. An offline version could be one way of luring subscribers – as you can see here – the mobile Spotify caches songs to be played offline, with iTunes-like easy synchronisation. An iPhone version is in the works, the company has confirmed.

So who is Fifty Quid Bloke, and why does he matter? And what’s it got to do with Spotify?

The Imelda Marcos factor

Publisher David Hepworth popularised the phrase in a 2003 speech to the BPI. Word magazine’s Andrew Harrison defined him for us.

“It’s someone who buys CD box sets like women buy shoes, they make him feel good. Then he takes them home and never listens to them.”

The phrase stuck because from the beginning of the decade on, the 40 to 49-year-old age group had overtaken the 12 to 19-year-olds in the amount they spent on recorded music. But competition was always tough for 50QB’s dosh – as this graph shows.

Spotify’s demographic is around 40, and precisely the sort of impulsive media buyer defined by 50QB. (50QB was always a big internet user, the first on the block with broadband, and likely to be the first to use new services, either licensed offerings like Spotify, or unlicensed ones, like Oink.)

The puzzle – as we raised here – is why the major labels seem so content to back Spotify, which encourages customers to defer purchases (the music’s always there), which ensures someone else bags the Fifty Quid – such as games or movies companies.

Unlicensed services such as Bittorrent trackers provide a “box set” experience, of sorts. Pirate Bay’s Top 50 include fan-made compilations of Pink Floyd, Coldplay and “Rolling Stone Magazine’s Top 500 Songs of All Time”; and much of that music will lie around on a hard disk without even being played once. So the consumer demand that 50QB represents still appears to be there, but the demand isn’t being met with licensed services. It’s hard to see how the major labels’ enthusiasm for Spotify helps meet it.

In the next instalment of the Great Spotify Mystery, we’ll examine how long the business can be sustained.

The music business has set up a lemonade stand outside its house and it’s giving away lemonade for free. Not surprisingly, people love the free lemonade, and the stall has drawn a large and enthusiastic crowd. The stand is called Spotify.

The business justifies this because it’s so easy for us to get their music for free elsewhere. With very little effort, you can obtain it simply by appending a magic word (‘torrent’ or ‘rapidshare’ usually do the trick) to the artist you’re looking for in Google.

Acquiring it may not be pleasant: doing so may help support a neo-Nazi with a grudge. But many people are prepared to hold their breath, because you can fill up your iPod or phone with music without paying any more than your monthly internet fee. That fee is a bit of a bummer – why can’t it all be free? – but a modest outgoing on a computer and an internet connection saves a lot of money.

The business looks down on this free and easy access to its assets quite understandably. Because if it’s all free, then investment in making sound recordings will evaporate. Only fools invest in businesses which aren’t going to make any money.

You’re following, I hope.

So to compete with businesses which don’t make any money and give away free music, they’re backing a business which doesn’t make any money, and gives away music for free. It’s genius.

But it gets better.

Read more at The Register