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Journal Selections from MSI

Digital Disruption: Insights from Spotify

Overall revenue effects of streaming are positive.

Nils Wlömert and Dominik Papies estimate the impact of free and paid online streaming music services such as Spotify and Pandora on the sales of music from other formats such as CDs or downloads. They observe the music consumption behavior of 2,500 German consumers over 13 months. Among their findings:

  • Free (paid) streaming reduces expenditures in other channels by 11% (24%).
  • Paid streaming positively influences total revenue through subscription fees.
  • Free streaming only positively affects revenue for previously inactive adopters.

On an industry level, the authors find that the negative effect of free streaming on industry revenue is offset by the positive effect of paid streaming.

Based on their findings, Wlömert and Papies note that firms in adjacent industries (e.g., movies or books) should not expect that consumers use free streaming for sampling. Instead, they should anticipate that free offers will displace spending in other channels, and thus should frame offers to trigger conversions to premium services.

Download from ScienceDirect 
On-demand Streaming Services and Music Industry Revenues — Insights from Spotify's Market Entry by Nils Wlömert and Dominik Papies, International Journal of Research in Marketing (June 2016) 

Journal Selections from MSI (October 2016)

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