On October 27, 2014 singer-songwriter Taylor Swift released her fifth album, 1989. Named after her birth year, 1989 is Swift’s first official pop album, and seems to have been a successful rebranding of her music from her country-pop background. In the US, her new album sold 1.28 million albums in its first week alone, making it the top selling album of 2014 and creating the biggest album sales week since 2002, when Eminem’s album The Eminem Show sold 1.3 million copies in its first week.
The cover art for Swift’s 2014 album, 1989
One week following the enormous success of her album release, Swift surprised millions on November 3 when she decided to remove all of her music from Spotify, a music streaming service which allows users to listen to music free of charge, with the occasional advertisement inserted between songs. Her decision even surprised the service’s CEO. Why would Swift, who certainly makes millions of dollars a year, choose to remove her music from the service?
Swift’s move away from Spotify has caused some controversy, and opposing sides are presenting conflicting facts. According to Scott Borchetta, the CEO of Swift’s record label, Swift was paid less than $500,000 in the last year for having her albums available on the streaming service. That’s the equivalent of less than 50,000 albums sold. However, Daniel Ek, the CEO of Spotify, asserts that with the growth of Spotify Swift is on track to make more than $6 million per year through the service. Ek also stated that Spotify paid Swift’s label half a million dollars in the month before she removed her music, indicating that her record label and publisher take hefty chunks of her earnings. To further complicate matters, while Spotify is free to all users there are also paying subscribers who use the service. These subscribers now cannot listen to any of Swift’s music, despite paying Spotify a monthly fee. Her music is also still available on websites like Pandora.
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What are the effects of this move? As already discussed in an October blog post, music sharing and pirating websites cause a lot of harm to the music industry and the US economy. And those who choose to illegally download music for free rather than pay for the product disrespect music artists, discouraging them from making more music. By taking her albums off of Spotify, Swift is limiting the options listeners have of consuming her product. In economic terms, by eliminating Spotify as a market she is trying to cause an increase in demand for her music on other platforms like iTunes and CDs, which will earn her more money.
It appears to be working. Despite the removal of all her albums from Spotify and the availability of illegal pirating websites, Swift still sold over 400,000 albums during 1989‘s second week on the market, topping the music charts for the second week in a row. The increase in demand could also be partly attributed to the hype surrounding her album, beginning with a live stream announcement and a new single in August. The surprise move away from Spotify came the same day as a world tour announcement.
https://twitter.com/taylorswift13/status/529266725553201153
By limiting the options Swift fans have to listen to her music, she is forcing them to choose between their loyalty to her and their frugalness, and as evidence by continued album sales, Taylor appears to be winning. This indicates that there may still be hope for the music industry. It appears that fans are happy to pay for albums from artists they love when no legal substitute is provided. Similar to Swift’s situation, Beyoncé’s surprise self-titled fifth album, which was released exclusively on iTunes last December and is still not available in full on Spotify, became the 8th top selling album of 2013 in just the three weeks between its release and the end of the year. Perhaps artists like Taylor Swift and Beyoncé are setting a new standard in pop music by keeping their music off of free streaming services. Will this trend continue? Only time will tell. What’s my best advice to Spotify?
Whitman ECON 101: Principles of Microeconomics 
I think the music industry is such an interesting place to economically study. Not only can you look at the supply and demand of certain artists music, but like you wrote about, you can look at how different artists choice make a difference in the amount of money they make which is directly influenced by how many consumers want to buy their album. I also think it is really interesting to look at the supply of music and albums. If you buy an actual CD, there will be a limited supply. On the other hand, with iTunes there is no actual limit, everyone can purchase the album without there being a decrease in the supply. However, there is also Spotify which you mention adds to the equation as well. My question is if more artists continue to take their music off of Spotify, will consumers find a way to illegally listen to music? I also wonder just how much more money Taylor Swift will make just because she took her music off of Spotify.
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I’ve always wondered if music streaming sites you can subscribe to, such as spotify and pandora, are profitable for the artist. Similarly to netflix, I’ve also wondered if the piece of art (whether music of film) is given profit depending on how much people access it, therefore how many customers it brings to the website, or if they pay one, fixed price for it. Or both- is there a fixed cost for these websites by the initial purchase of the artistic material and a variable cost every time someone accesses it(also payed to the artist)? If so, I’d wonder how many times a customer would need to access someones song or movie for it to become as profitable in an accounting sense as if the customer has spent the money to purchase it.
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A very interesting choice by Taylor Swift. I think that she was very fed up with the fact that music artists are severely underpaid to what they could potentially make. Artists are very aware of the illegal downloading and free consumption of their music and I think it was an important step for Taylor Swift to take action against this and take off her music on Spotify. I am curious to see if other artists are going to follow this path, I think that for most music artists they want as many ears to listen to their music as possible. A lot of artists will put out mix-tapes just to keep the interest of their fans which I think is somewhat of a form of advertising their music. The music industry is rapidly changing as more and more music becomes free to access. I fully support T-Swift in her decision, she is one of my faves and I waited 3 hours outside of the record store to buy this 1989 album, totally worth the wait!
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