Selling Digital Music: Business Models for Public Goods
AbstractThis paper considers the market for digital music. We claim that the combination of the MP3 format and peer-to-peer networks has made music non-excludable and this feature is essential for the understanding of the economics of the music market. We study optimal business models for selling non-excludable goods and show that despite promising theoretical results, adding just a slight uncertainty about the number of customers has significant negative implications for profitability. Indeed, as the average number of customers tends to infinity the average payment per customer converges to zero. Therefore, the music industry should concentrate on alternative ways of creating profit such as selling access to listeners, concerts, merchandise, ringtones etc.
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Bibliographic InfoPaper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 09-19.
Length: 23 pages
Date of creation: Sep 2009
Date of revision:
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digital music; experience good; public good; music industry; piracy;
Other versions of this item:
- Jens Hougaard & Mich Tvede, 2010. "Selling digital music: business models for public goods," Netnomics, Springer, vol. 11(1), pages 85-102, April.
- D2 - Microeconomics - - Production and Organizations
- D4 - Microeconomics - - Market Structure and Pricing
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