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Is Taylor Swift Right About Spotify?

Are marquee artists who abstain from streaming services like Spotify saving the music industry, or hastening its demise?

Posted on November 3, 2014, at 6:49 p.m. ET

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The Spotify community and music industry prognosticators were set spinning today when Taylor Swift and her label abruptly pulled her entire catalog from the service. A source told BuzzFeed News that the move came as a surprise to Spotify, which didn't receive a formal takedown notice until last Thursday.

That source said Spotify was given no rationale by Swift's label, Big Machine Records, or management for the decision, but pointed to the prospective sale of Big Machine for upwards of $200 million — first reported over the weekend — as the reason.

"They think they can get a better sale multiple by creating scarcity to drive record sales, that's what this is about," said the source. "It almost makes sense if you think about it from the perspective of a business trying to sell itself for as much as possible, but it doesn't make sense for the artist or her fans."

But this isn't the first time Swift has set herself at odds with Spotify. In 2012, she withheld her blockbuster album Red from the service for months after its release (1989, her new album, never arrived there), indicating that she's never fully supported it.

So why not?

While the rest of the music industry has largely accepted recent declines in the demand for physical and digital albums — opting to maximize other revenue streams like touring and publishing in its place — album sales are still a big deal for an artist of Swift's stature. Her broad appeal, track record of hit songs, and wildly engaged fanbase add up to a crucial value for retailers, especially during release week.

1989's current, remarkable first-week run — expected to result in over 1.3 million copies sold — will actually best the 1.2 million Red sold in a week in 2012, when album sales across the industry were much higher on average than they have been this year. In fact, 1989 may end up having the biggest first week for an album since 2002, when Eminem released The Eminem Show and Carson Daly was still a household name.

There's a persistent and powerful faction of the music industry that believes big first-week numbers like these are the direct result of an album being scarce — that is to say unavailable on streaming services and hard to find on illegal downloading sites. The thinking is that if the labels can make it difficult for customers to find the album anywhere else, they'll be more likely to cough up the $9.99 to get it on iTunes or while in line at the grocery store.

That theory is lent credence by other scarce albums that have had huge debuts over the past year, including Beyoncé's self-titled surprise album last December (617,000 sold in three days) and Coldplay's Ghost Stories this May (383,000 sold in one week), neither of which was released to Spotify.

RICARDO MORAES / REUTERS

In addition to release-week economics, some artists continue to argue that streaming services like Spotify don't pay enough in royalties to artists for the music that they use. The Black Keys, Thom Yorke, Garth Brooks, and AC/DC are a few high-profile artists who have abstained from making some or all of their music available on streaming services.

Swift hasn't commented publicly on Spotify's royalty rates (Update: In a new interview with Yahoo! Music, Swift called Spotify a "grand experiment," adding: "I'm not willing to contribute my life's work to an experiment that I don't feel fairly compensates the writers, producers, artists, and creators of this music. And I just don't agree with perpetuating the perception that music has no value and should be free."), but in an op-ed for the Wall Street Journal from earlier this year, she made her feelings clear by listing streaming among factors that have devalued the music industry.

"Piracy, file sharing and streaming have shrunk the numbers of paid album sales drastically, and every artist has handled this blow differently," she said. And she went on: "Music is art, and art is important and rare. Important, rare things are valuable... I hope [other artists] don't underestimate themselves or undervalue their art."

Without albums by Taylor Swift, Beyoncé, Coldplay, and other big artists, Spotify could face an existential threat. The service's 40 million users have come to expect access to all of the world's music, not a second-rate collection with a growing number of prominent holes.

Spotify, meanwhile, has argued that streaming is additive to music consumption and doesn't actually cannibalize sales. A source at the company pointed to Canada's music industry, which saw a 6% decline in album sales last year despite being Spotify-free until just last month. That's not far behind the Spotify-friendly U.S., which experienced an 8% decline in album sales last year. Additionally, Spotify points out that songs on streaming services continue to earn money from fans with each play, while a download results in a one-time payout to the artist.

So who's right here? Do Swift and Big Machine stand to gain more than they lose by withholding from Spotify? Or, by starving the service in a world that seems unwilling to pay for albums in a majority of cases, are they sabotaging the music industry's last hope? One thing is clear: If you thought the debate over the viability of music streaming was over, think again. It may have only just begun.

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