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Abstract:

cover
CEP Discussion Paper
Video Killed the Radio Star? Online Music Videos and Digital Music Sales
Tobias Kretschmer and Christian Peukert
April 2014
Paper No' CEPDP1265:
Full Paper (pdf)

JEL Classification: L82; M37; D83


Tags: sampling; displacement; promotion; natural experiment

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.