Let the Music Play? Free Streaming, Product Discovery, and Digital Music Consumption
Institute for Prospective Technological Studies Digital Economy Working Paper 2015/16, Joint Research Centre of the European Commission, Technical Reports, ISSN 1831-9408 (online)
36 Pages Posted: 27 Jan 2016
Date Written: December 3, 2015
Interactive music streaming services have grown tremendously in recent years, raising questions about their effects on digital music sales and piracy. While often overlooked in practice, theoretical considerations suggest that these effects may differ according to the streaming services' functionality. Premium subscriptions, for instance, offer consumers unlimited and unconstrained access to music, providing little incentives to acquire digital music through alternative channels of consumption. On the other hand, free and advertisement-supported services provide consumers with very limited mobility in their usage. If music streaming allows for the discovery of new products, and if consumers value mobility, then free streaming services may well stimulate the use of channels that offer the possibility of mobile consumption. We rely on individual-level clickstream data on a representative sample of 5,000 French Internet users to study the question of how free music streaming affects music purchasing and piracy behavior. We exploit the introduction of a listening cap by the French streaming platform Deezer in June 2011 to identify this causal effect in a difference-in-differences setting. Our results show that free streaming services stimulate alternative channels of music consumption that offer mobility. We find that users of Deezer's free streaming services visited licensed downloading websites up to 2.9% less than they would have had the restriction not been introduced. Similarly, they decrease their visits to unlicensed downloading websites by as much as 2%. Our findings are indicative of online music streaming serving as an information channel for the discovery of new products, and our analysis serves as a first step toward understanding the heterogeneity of effects that streaming platforms may have on the rapidly changing recorded music industry.
Keywords: Music Streaming, Music Industry, Copyright, Natural Experiment.
JEL Classification: K42, L82, O34, O38.
Suggested Citation: Suggested Citation