Jan 5, 2015 · 4 minutes

Buried in an epic blog post summing up his 2014, Bono came out in defense of that most loathed of streaming services: Spotify.

The reason I respect for-fee services like Spotify is that they are slowly turning people who are used to getting their music for-FREE, into paying ten dollars a month for a subscription model.

These payments don't add up to replacement for income from physical or digital sales at the moment– but I think they can if everyone sits down – record companies, artists and digital services – to figure out a fairer way of doing business. This isn't the first time Bono has stood up for Daniel Ek's fast-growing music startup, which now has over 50 million users. Speaking at the Web Summit conference in Dublin last November, the U2 frontman laid much of the blame for low streaming royalty payments on record labels:

"When people pick on Spotify: Spotify are giving up 70% of all their revenues to rights owners. It’s just that people don’t know where the money is because the record labels haven’t been transparent."

Bono is right to call out record labels' share of the blame for low royalty payments. For decades, artists have received a raw deal from labels. The biggest difference now is that there's less money to go around -- no more $17 CDs -- and therefore the pain artists feel has been compounded even further. But let's go back to Bono's more recent point, that Spotify "are slowly turning people who are used to getting their music for-FREE, into paying ten dollars a month for a subscription model." Is he right?

While it's true that Spotify does bring on more and more paid subscribers as its total base increases, the percentage of those users who pay $10 a month for the service has remained remarkably steady at 25 percent. When Spotify hit 20 million users in 2012, 5 million of them were paid subscribers. When it hit 40 million users, 10 million of them paid. And now that the service has 50 million users, 12.5 million pay. Again, every penny paid by a user to Spotify counts, and so these increases aren't irrelevant. However, it's likely that these users already paid for music in some form, like digital downloads. And with digital downloads in a free-fall, it doesn't take much of a leap to assume that these paid subscribers aren't necessarily adding much to the total pool of global music revenue, as much as they're opting to pay $120 a year for virtually all the music in the world, as opposed to buying a dozen $9.99 albums on iTunes.

So the evidence is flimsy that services like Spotify convert non-music buyers into music buyers. But does the service at least convince those already predisposed to pay for music to spend more per year?

Studies have shown that for years music buyers have spent around the same annual amount -- around $50 -- regardless of format. In 1999, when the pricy compact disc was king and US music revenues hit record highs, the average music buyer spent $64 over the course of the year. By 2011 that number had slipped, but only to $55. And Apple has found that its users spent around $48 a year on music. Meanwhile, a yearly Spotify subscription costs $120 a year.

On the surface, it sounds like Spotify is indeed convincing people to pay more for music. But considering that the amount of money music buyers are willing to spend has stayed fairly constant, even as free options have exploded, it suggests that the $120 price point may do more to alienate potential consumers than convince them to start forking over cash. Perhaps the best pricing model to maximize revenue would be to eliminate the free ad-supported version -- like Apple's streaming music has -- and instead charge around $4 a month for full ad-free access to the service on both desktop and mobile devices.

Unfortunately it may be too late for that. Unlike video streaming services like Netflix, which capitalized on consumers' willingness to pay for access as opposed to ownership -- a holdover from the days of video rentals -- music streaming services have already normalized the habit of getting all the music users want, both legally and free-of-charge. Sure, if Apple can use its industry influence to offer a more complete catalog than Spotify, maybe it can convince a few more users to join its pay-only service. But these paying customers will always be outliers. This is the Internet, where content is paid for by advertisers and by collecting user data, not by collecting user dollars.

Again, Bono isn't completely wrong -- the only way to bring the music industry back to its former glory is to convince more people to pay for music. Furthermore, streaming services are only one of many enemies artists face in their struggle to earn a decent living. And it's hard to argue with the bargain Spotify offers -- as a high schooler in the 90s I never dreamed I could listen to millions of songs for the price of 10 CDs a year.

But it's only a bargain if people are willing to pay for it. And the argument that Spotify, by offering an extremely attractive free version alongside an arguably over-priced paid option, is convincing more people to pay for music, simply doesn't fly.

[illustration by Brad Jonas]