Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/48156
Authors: 
Thomes, Tim Paul
Year of Publication: 
2011
Series/Report no.: 
ZEW Discussion Papers 11-039
Abstract: 
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.
Subjects: 
Advertising media
Music industry
Online streaming
Piracy
JEL: 
D42
L12
L82
Persistent Identifier of the first edition: 
more recent Version: 
Document Type: 
Working Paper

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