Around 200 labels were pulled from streaming music sites including Spotify, Napster, Simfy, and Rdio by their parent company in the past week, following the publishing of new study from NPD Group and music industry group NARM.
ST Holdings, the owner of the 200 labels, said it pulled the labels because the study, which was published via the Digital Music News, found that Spotify and similar services discouraged record sales instead of promoting them.
“Despite these services offering promotion to many millions of music listeners we have concerns that these services cannibalise the revenues of more traditional digital services,” it said in a statement, citing the NPD and NARM study.
The company said when it asked record labels whether they would like to be featured on Spotify and the other music services, only four said they would, according to the statement.
“As a distributor we have to do what is best for our labels. The majority of which do not want their music on such services,” ST Holdings said.
Spotify and its ilk “provide poor revenue and have a detrimental affect on sales. Add to that, the feeling that their music loses its specialness by its exploitation as a low value/free commodity,” it added.
Although this sound like a cataclysmic event for Spotify and Napster, many of the labels are relatively small and are based in the U.K., specializing in electronic music including dubstep, drum & bass, and techno. Spotify, the largest of the four services affected, continues to offer a plethora of mainstream music from the four largest record labels and other independent labels.
Several weeks ago, recording artists Coldplay and Tom Waits also said they would not release their latest albums on Spotify, according to a report from CNET, citing insider sources.
In the NPD NARM study, Spotify and similar digital music mediums discouraged the purchase of music instead of encouraging sales. “In fact, access has been deemed ‘most detrimental’ to monetization across nearly all demographic categories,” it states.
Even though the services increase accessibility to artists, labels are not able to capitalize on the sales of CDs, vinyl, or iTunes downloads, the study found.
The study also noted that other services including Grooveshark, Soundcloud, and even YouTube are cutting into profits. The study was unclear, however, as to how much these websites impacted labels.
A spokesperson with Spotify told the Music Ally website the company is “confused by the way this research has been interpreted” because it “was not referenced anywhere in the research questionnaire and had only been live in the U.S. for a matter of days when the study was carried out.”
The spokesperson cited data from Europe, where Spotify was first launched, which found the sharing site correlated to a 43 percent growth in the digital music growth market, compared with 9.3 percent in countries that did not feature Spotify.