Fighting Free with Free: Freemium vs. Piracy

42 Pages Posted: 5 Aug 2014 Last revised: 2 Dec 2014

Christine Halmenschlager

University of Paris II Pantheon-Assas - ERMES

Patrick Waelbroeck

Telecom ParisTech

Date Written: November 29, 2014

Abstract

In this article, we show how new online music streaming services such as Spotify and Deezer can deter piracy. These new services monetize large audiences with low willingness to pay for music. We analyze a simple freemium model in which a firm offers both a free version and a premium version. The firm can restrict the use of the free version. Consumers can choose between the free and the premium version, but can also get a digital copy. More restrictions can increase the number of premium users but diverts other users to piracy. On the contrary, fewer restrictions deter online piracy. We therefore challenge the idea that without strong copyright laws, there is no market for online music. We also argue that there are market solutions to fight free with free that better segment consumers audiences according to their willingness to pay for digital music.

Keywords: Online piracy, versioning, freemium, streaming, copyright, music

JEL Classification: L12, L82, L86, O34

Suggested Citation

Halmenschlager, Christine and Waelbroeck, Patrick, Fighting Free with Free: Freemium vs. Piracy (November 29, 2014). Available at SSRN: https://ssrn.com/abstract=2475641 or http://dx.doi.org/10.2139/ssrn.2475641

Christine Halmenschlager (Contact Author)

University of Paris II Pantheon-Assas - ERMES ( email )

12 Place du Panthéon
Paris, Cedex 5, 75005
France

Patrick Waelbroeck

Telecom ParisTech ( email )

46 rue Barrault
F-75634 Paris, Cedex 13
France

Register to save articles to
your library

Register

Paper statistics

Downloads
698
rank
32,050
Abstract Views
1,949
PlumX