Music Consumption Decisions with Non-Durable Streaming Options

42 Pages Posted: 15 Nov 2018 Last revised: 27 Feb 2019

See all articles by Jason M. Walter

Jason M. Walter

University of Wisconsin - Stout

R. Scott Hiller

Fairfield University - Department of Economics

Date Written: January 14, 2019

Abstract

Consumers are increasingly purchasing non-durable music products, consumed through a streaming bundle delivered via a subscription model. In this paper we examine how individual preferences influence a consumer's music format decision. We analyze consumption differences between durable retail music products and non-durable streaming music subscription bundles. A user's preferred format depend on the intensity of their music interests, scope of interests, and how quickly a song's utility depreciates. Our empirical analysis shows that streaming consumers have greater depreciation rates than the traditional distribution of terrestrial radio, and that digital sales decline at a slower rate than does the usage of the streaming version. Our theory model and empirical evidence suggest that consumers prefer a non-durable subscription over a durable purchase of information goods when they have higher depreciation rates or a greater scope of music interests. Using simulation, we identify the ideal consumption format for consumers based on their individual listening preferences.

Keywords: streaming bundle; music consumption; subscription platform services; digital sales

JEL Classification: D11, D12, L8

Suggested Citation

Walter, Jason M. and Hiller, R. Scott, Music Consumption Decisions with Non-Durable Streaming Options (January 14, 2019). Available at SSRN: https://ssrn.com/abstract=3274990 or http://dx.doi.org/10.2139/ssrn.3274990

Jason M. Walter

University of Wisconsin - Stout ( email )

Menomonie , WI 54751
United States

R. Scott Hiller (Contact Author)

Fairfield University - Department of Economics ( email )

Fairfield, CT 06824
United States

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