Video Killed the Radio Star? Online Music Videos and Digital Music Sales
Ludwig Maximilian University of Munich - Faculty of Business Administration (Munich School of Management); London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP)
University of Zurich - Faculty of Economics, Business Administration and Information Technology
April 15, 2014
CEP Discussion Paper No 1265
Sampling poses an interesting problem in markets with experience goods. Free samples reveal product quality and help consumers to make informed purchase decisions (promotional effect).
However, sampling may also induce consumers to substitute purchases with free consumption (displacement effect).
We study this trade-off in the market for digital music where consumers can sample the quality of songs by watching free music videos online. Identification comes from a natural experiment in Germany, where virtually all videos that contain music are blocked on a popular video platform due to a legal dispute with representatives of the rights-holders.
We show that promotional and displacement effects cancel out in the sales performance of individual songs, whereas online music videos trigger sales of albums.
Number of Pages in PDF File: 30
Keywords: Sampling, Displacement, Promotion, Natural Experiment
JEL Classification: L82, M37, D83
Date posted: April 17, 2014
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