Disagree I consider myself the average music fan and the reason I like this service is that I have all my music with me where ever I go, even if its not my device. Other people I know who use Spotify are mostly average the other half isnt.
Spotify has converted me from a pirate in my younger days to a paid music subscriber.
That's a misleading sentence, it implies that your listening choices do not affect how much money goes to indie artists, which is not true. The proportion that each artist gets depends on how many plays they have relative to the plays of all artists in total in a particular time period, which is a proportion you do influence by what you choose to play.
If you want to be misleading in the other direction, you could just as easily say:
"They don't pay per play, so some of your money goes to Satanist artists no matter how mainstream your listening habits are."
Do you disagree that it would be better for the $10/mo a subscriber pays to go only to the artists they listen to?
Great analysis, btw.
Spotify has paid out $1B in 9 years. iTunes is paying out over $1B PER QUARTER. 
2. Spotify also has an ARPU cap ($120/yr) - Not only do none of their competitors have this, but it is likely others will find ways to increase APRU (better video CPMs or iTunes exclusives are just a few options). This will likely make Spotify a less appealing distribution option going forward.
3. It seems implausible Spotify is the cause for reduced piracy - YouTube has 10x the content, $0 cost, no need to download an application or creating an account and has 50x the user base.
 - Don't worry, I'm not including app sales in this figure.
The entire recorded music industry was $16.5 billion in 2012 (According to the IFPI). To put that in perspective...
- $364b: The TV industry (2009)
- $557b: Our spending on the war in Afghanistan
- $523b: The amount the world spends on beer each year (excluding other types of booze)
The point here is that the cultural value of recorded music is (I believe) not reflected in it's market footprint. For better or for worse (mostly for better I think) music is cheap.
I don't understand. To me, the change in physical sales appears to be asymptotically approaching 0. Why assume it suddenly goes positive and then use that guess to make Spotify look deceptive?
>Spotify is playing a little fast and loose here, though. A Spotify Premium user isn't the average music fan. Only 25% of Spotify's active user base pays for the Premium service. .. A fairer comparison might have been the average U.S. citizen against the average Spotify user, since both include people not really paying for music.
No, they're not. They're comparing paying Spotify customers to US paying listeners. If you think comparing nonpaying to nonpaying is reasonable, paying to paying should be reasonable too.
>In a year, Spotify makes about $14.67 per advertising-supported user , but those folks if considered just typical Americans would spend $25 on average . That's just over $10 per year lost for each cannibalized person.
Why assume those people aren't buying music also?
Paying to paying is not completely unreasonable, but imagine an airline using the average fares of its Airline Club members (who are often flying first class) vs the fares of average Americans. It's easy to inflate the number when the group of people you're talking about are rich and predisposed to being more engaged.
edit to your edit: It's not clear to me why you would be willing to listen to Spotify for free, but then buy music on the side. Anecdotally, I've never met anyone who does that consistently. I'd be interested to hear contradicting anecdotes though.
I've bought so few physical music products over my life that I assume my buying habits are completely different than the average person... but I have no idea. One case you might consider is gifts. On an impulse, I bought several Christmas music CDs last year and I also happen to use ad supported Spotify.
Regarding that, I'm not quite as optimistic as your projections on digital sales. I don't think it trends up forever. I don't have a crystal ball, but I have a feeling that downloads sales will actually peak in the next 1-3 years. At which point, the record industry will REALLY start freaking out (again).