An economic analysis of online streaming. How the music industry can generate revenues from cloud computing
This paper investigates the upcoming business model of online streaming services allowing music consumers either to subscribe to a service which provides free-of-charge access to streaming music and which is funded by advertising, or to pay a monthly flat fee in order to get ad-free access to the content of the service accompanied with additional benefits. By imposing a two-sided market model on the one hand combined with a direct transaction between the streaming service and its flat-rate subscribers on the other hand, the investigation shows that it can be highly profitable to launch a business which is free-of-charge for subscribers if advertising imposes a weak nuisance to music consumers. If this is the case, and by imposing an endogenously determined level of advertising which is provided by homogeneous advertisers, we find that a monopolistic streaming service increases the price for its flat-rate subscribers in order to stimulate free-of-charge demand and to capture higher revenues from advertisers. An extension of the model by illegal file-sharing shows that an increase in copyright enforcement shifts rents from music consumers to the monopolist.
|Date of creation:||2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.zew.de/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jean-Charles Rochet & Jean Triole, 2002.
"Platform Competition in Two Sided Markets,"
FMG Discussion Papers
dp409, Financial Markets Group.
- Rochet, Jean-Charles & Tirole, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers 152, Institut d'Économie Industrielle (IDEI), Toulouse.
- Jean-Charles Rochet & Jean Triole, 2002. "Platform competition in two sided markets," LSE Research Online Documents on Economics 24929, London School of Economics and Political Science, LSE Library.
- Tobias Regner & Javier A. Barria, 2007.
"Do Consumers Pay Voluntarily? The Case of Online Music,"
Jena Economic Research Papers
2007-011, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
- Regner, Tobias & Barria, Javier A., 2009. "Do consumers pay voluntarily? The case of online music," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 395-406, August.
- Choi, Jay Pil, 2006. "Broadcast competition and advertising with free entry: Subscription vs. free-to-air," Information Economics and Policy, Elsevier, vol. 18(2), pages 181-196, June.
- ANDERSON, Simon P. & GABSZEWICZ, Jean J., 2005.
"The media and advertising : a tale of two-sided markets,"
CORE Discussion Papers
2005088, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Anderson, Simon P. & Gabszewicz, Jean J., 2006. "The Media and Advertising: A Tale of Two-Sided Markets," Handbook of the Economics of Art and Culture, Elsevier.
- ANDERSON, Simon P. & GABSZEWICZ, Jean J., . "The media and advertising: a tale of two-sidedmarkets," CORE Discussion Papers RP -1888, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Anderson, Simon P & Gabszewicz, Jean Jaskold, 2005. "The Media and Advertising: A Tale of Two-Sided Markets," CEPR Discussion Papers 5223, C.E.P.R. Discussion Papers.
- Simon P., ANDERSON & Jean J., GABSZEWICZ, 2005. "The media and advertising : a table of two-sided markets," Discussion Papers (ECON - Département des Sciences Economiques) 2005060, Université catholique de Louvain, Département des Sciences Economiques.
- Simon P. Anderson & Stephen Coate, 2003.
"Market Provision of Broadcasting: A Welfare Analysis,"
Virginia Economics Online Papers
358, University of Virginia, Department of Economics.
- Simon P. Anderson & Stephen Coate, 2005. "Market Provision of Broadcasting: A Welfare Analysis," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 947-972.
- Peitz, Martin & Valletti, Tommaso, 2004.
"Content and Advertising in the Media: Pay-TV versus Free-To-Air,"
CEPR Discussion Papers
4771, C.E.P.R. Discussion Papers.
- Peitz, Martin & Valletti, Tommaso M., 2008. "Content and advertising in the media: Pay-tv versus free-to-air," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 949-965, July.
- Paul Belleflamme & Martin Peitz, 2010.
"Digital Piracy: Theory,"
CESifo Working Paper Series
3222, CESifo Group Munich.
- Novos, Ian E & Waldman, Michael, 1984. "The Effects of Increased Copyright Protection: An Analytic Approach," Journal of Political Economy, University of Chicago Press, vol. 92(2), pages 236-46, April.
- Liebowitz, Stan J, 2006. "File Sharing: Creative Destruction or Just Plain Destruction?," Journal of Law and Economics, University of Chicago Press, vol. 49(1), pages 1-28, April.
- Peitz, Martin & Waelbroeck, Patrick, 2006. "Why the music industry may gain from free downloading -- The role of sampling," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 907-913, September.
- Alan B. Krueger, 2005. "The Economics of Real Superstars: The Market for Rock Concerts in the Material World," Journal of Labor Economics, University of Chicago Press, vol. 23(1), pages 1-30, January.
- Gayer, Amit & Shy, Oz, 2003. "Internet and peer-to-peer distributions in markets for digital products," Economics Letters, Elsevier, vol. 81(2), pages 197-203, November.
- Duchene, Anne & Waelbroeck, Patrick, 2006. "The legal and technological battle in the music industry: Information-push versus information-pull technologies," International Review of Law and Economics, Elsevier, vol. 26(4), pages 565-580, December.
- Ben Shiller & Joel Waldfogel, 2009. "Music for a Song: An Empirical Look at Uniform Song Pricing and its Alternatives," NBER Working Papers 15390, National Bureau of Economic Research, Inc.
- Bhattacharjee, Sudip & Gopal, Ram D & Lertwachara, Kaveepan & Marsden, James R, 2006. "Impact of Legal Threats on Online Music Sharing Activity: An Analysis of Music Industry Legal Actions," Journal of Law and Economics, University of Chicago Press, vol. 49(1), pages 91-114, April.
When requesting a correction, please mention this item's handle: RePEc:zbw:zewdip:11039. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.