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Video killed the radio star? Online music videos and digital music sales

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  • Kretschmer, Tobias
  • Peukert, Christian

Abstract

Sampling poses an interesting problem in markets with experience goods. Free samples reveal product quality and help consumers to make informed purchase decisions (promotional effect). However, sampling may also induce consumers to substitute purchases with free consumption (displacement effect). We study this trade-o_ in the market for digital music where consumers can sample the quality of songs by watching free music videos online. Identification comes from a natural experiment in Germany, where virtually all videos that contain music are blocked on a popular video platform due to a legal dispute with representatives of the rights-holders. We show that promotional and displacement effects cancel out in the sales performance of individual songs, whereas online music videos trigger sales of albums.

Suggested Citation

  • Kretschmer, Tobias & Peukert, Christian, 2014. "Video killed the radio star? Online music videos and digital music sales," LSE Research Online Documents on Economics 60276, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:60276
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    Cited by:

    1. Luis Aguiar & Joel Waldfogel, 2015. "Streaming Reaches Flood Stage: Does Spotify Stimulate or Depress Music Sales?," NBER Working Papers 21653, National Bureau of Economic Research, Inc.
    2. Ramadan Aly-Tovar & Maya Bacache-Beauvallet & Marc Bourreau & Francois Moreau, 2020. "Why would artists favor free streaming?," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 44(2), pages 255-280, June.
    3. Lisa M. George & Christian Peukert, 2014. "YouTube Decade: Cultural Convergence in Recorded Music," Working Papers 14-11, NET Institute.
    4. Christian Peukert, 2019. "The next wave of digital technological change and the cultural industries," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 43(2), pages 189-210, June.
    5. Aguiar, Luis & Waldfogel, Joel, 2018. "As streaming reaches flood stage, does it stimulate or depress music sales?," International Journal of Industrial Organization, Elsevier, vol. 57(C), pages 278-307.
    6. Luis Aguiar, 2015. "Let the Music Play? Free Streaming, Product Discovery, and Digital Music Consumption," JRC Working Papers on Digital Economy 2015-16, Joint Research Centre (Seville site).
    7. Aguiar, Luis & Martens, Bertin, 2016. "Digital music consumption on the Internet: Evidence from clickstream data," Information Economics and Policy, Elsevier, vol. 34(C), pages 27-43.

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    More about this item

    Keywords

    Sampling; displacement; promotion; natural experiment;

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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