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.

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Tobias Kretschmer and Christian Peukert

11 April 2014     Paper Number CEPDP1265

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

This CEP discussion paper is published under the centre's Growth programme.