Video Killed the Radio Star? Online Music Videos and Recorded Music Sales

CEP Discussion Paper No 1265

32 Pages Posted: 17 Apr 2014 Last revised: 6 Nov 2015

Tobias Kretschmer

Ludwig Maximilian University of Munich - Faculty of Business Administration (Munich School of Management); Centre for Economic Policy Research (CEPR)

Christian Peukert

University of Zurich - Faculty of Economics, Business Administration and Information Technology

Date Written: October 28, 2015

Abstract

In experience goods markets, free samples help consumers make informed purchase decisions. However, sampling may also let consumers substitute purchases with free consumption. We study this trade-off in the market for recorded music where con- sumers can sample songs by watching free music videos online. Identification comes from two quasi-experiments in Germany. In 2009, virtually all official music videos were blocked from YouTube due to a legal dispute. The situation remained largely unchanged until the dedicated platform VEVO entered the market in 2013, making videos of a large number of artists available over night. We find that both restricting and enabling access to online videos has consistent complementary effects on digital music sales, but there is not much evidence for an effect on physical sales. Moreover, online videos are much more effective in triggering downloads of songs by new artists compared to established artists. This yields interesting implications for managers and policy.

Keywords: Sampling, Displacement, Promotion, Sales

JEL Classification: L82, M37, D83

Suggested Citation

Kretschmer, Tobias and Peukert, Christian, Video Killed the Radio Star? Online Music Videos and Recorded Music Sales (October 28, 2015). CEP Discussion Paper No 1265. Available at SSRN: https://ssrn.com/abstract=2425386 or http://dx.doi.org/10.2139/ssrn.2425386

Tobias Kretschmer

Ludwig Maximilian University of Munich - Faculty of Business Administration (Munich School of Management) ( email )

Kaulbachstr. 45
Munich, 80539
Germany

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Christian Peukert (Contact Author)

University of Zurich - Faculty of Economics, Business Administration and Information Technology ( email )

Affolternstrasse 56
Zürich, 8050
Switzerland

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