The market for digital content (e.g., music or movies) has been affected by large numbers of Internet users downloading content for free from illegitimate sources. The music industry has been exposed most severely to these developments and has reacted with several different online business models but with only limited success thus far. These business models include attempts to attract consumers by offering free downloads while relying on advertising as a revenue source. Using a latent-class choice-based conjoint analysis, we analyze the attractiveness of these business models from the consumer’s perspective. Our findings indicate that advertising-based models have the potential to attract consumers who would otherwise refrain from commercial downloading, that they cannot threaten the dominance of download models like iTunes, and that current market prices for subscription services are unattractive to most consumers.
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We thank an anonymous reviewer for pointing out these distinctions.
As another benchmark for the validity assessment, we estimated utilities by means of a hierarchical Bayes procedure (Rossi and Allenby 1993; Rossi et al. 2005; Rossi and McCulloch 2006), which resulted in comparable validity measures, i.e., a hit rate of 59.2% and MAE values of 3.85 (logit) and 2.75 (first-choice). We rely on the segment-level approach here because it generates more managerially relevant information.
The choice shares implicitly consider that a choice for a given business model may not be exclusive. Rather, they can indicate a usage ratio between generally acceptable business models.
Elasticities are computed as the relative change in market share divided by the relative change in price on all attribute levels for price compared to a medium price level of € 0.99 for DST and € 9.99 for subscription models.
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The authors would like to thank Karen Gedenk, Michel Clement, Mark Heitmann, and three anonymous reviewers for their helpful comments.
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Papies, D., Eggers, F. & Wlömert, N. Music for free? How free ad-funded downloads affect consumer choice. J. of the Acad. Mark. Sci. 39, 777–794 (2011). https://doi.org/10.1007/s11747-010-0230-5