The Impact of Licensed and Unlicensed Free Goods: An Empirical Analysis of Music, Video, and Book Industries in Japan

27 Pages Posted: 18 May 2020 Last revised: 16 May 2022

See all articles by Shinichi Yamaguchi

Shinichi Yamaguchi

International University of Japan

Hirohide Sakaguchi

Keio University

Kotaro Iyanaga

International University of Japan

Tatsuo Tanaka

Keio University

Date Written: April 21, 2020

Abstract

The current progress in digitization and the development of information and communication technologies dramatically changed the creative industries’ business model. Although new free goods spread broadly as technology develops, economists and company managers are very interested in the impact free goods have on their paid goods. Considering their complementary and substitution effects, we discuss the impact of official and informal free goods on the consumption of paid goods in three creative industries in Japan. We employ an instrumental variables method and a large questionnaire data set. Official free goods have a significant positive effect on paid goods in the music industry, with an elasticity of 0.11, but no significant effect in the video and book industries. Informal (pirated) free goods have no significant effects in the book industry, but have a significant negative effect in the music and video industries, with elasticities of -0.23 and -0.19, respectively. The above results imply that, employing the business model of offering free goods is a useful strategy in the music industry. On the other hand, the supply of informal free goods affects the producers in the music and video industries negatively.

Keywords: Creative Industry, Free Goods, File Sharing, Piracy, Freemium, Music Industry

JEL Classification: K42, L82, O34

Suggested Citation

Yamaguchi, Shinichi and Sakaguchi, Hirohide and Iyanaga, Kotaro and Tanaka, Tatsuo, The Impact of Licensed and Unlicensed Free Goods: An Empirical Analysis of Music, Video, and Book Industries in Japan (April 21, 2020). Available at SSRN: https://ssrn.com/abstract=3568428 or http://dx.doi.org/10.2139/ssrn.3568428

Shinichi Yamaguchi (Contact Author)

International University of Japan

Japan

Hirohide Sakaguchi

Keio University

Japan

Kotaro Iyanaga

International University of Japan

Yamato-machi
Niigata-ken 949-7277
United States

Tatsuo Tanaka

Keio University

Japan

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