On-demand Music Streaming Services Decrease Sales, Says NPD

Posted 02/25/2010 at 7:02pm | by Ryan Whitwam

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In a recent presentation to music and tech industry executives, NPD Group’s Russ Crupnick had some interesting things to say about music streaming. According to Crupnick, on-demand streaming services like Spotify result in a 13 percent decrease in paid downloads. He went on point out that services that follow the “radio” model, like Pandora, increase sales 41%.

Pandora doesn’t allow users to select specific songs like Spotify, but instead plays music in a chosen genre more or less randomly. The unsurprising conclusion is that people are less likely to buy a song if they can stream it at any time. Perhaps it isn’t that simple; is it possible to draw enough new users to increase overall sales? The key for Spotify may be the effort to convert free users to paid premium users.

This report is just the sort of thing music labesl could use to justify keeping Spotify from launching in the US. Warner Music Group Chairman Edgar Bronfman said earlier this month, “Free streaming services are clearly not net positive for the industry.” If Spotify launched stateside, would you ante up for extra features like mobile streaming?