Selling Digital Music: Business Models for Public Goods

Jens Hougaard () and Mich Tvede

No 09-19, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: This paper considers the market for digital music. We claim that the combination of the MP3 format and peer-to-peer networks has made music non-excludable and this feature is essential for the understanding of the economics of the music market. We study optimal business models for selling non-excludable goods and show that despite promising theoretical results, adding just a slight uncertainty about the number of customers has significant negative implications for profitability. Indeed, as the average number of customers tends to infinity the average payment per customer converges to zero. Therefore, the music industry should concentrate on alternative ways of creating profit such as selling access to listeners, concerts, merchandise, ringtones etc.

Keywords: digital music; experience good; public good; music industry; piracy (search for similar items in EconPapers)
JEL-codes: D2 D4 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2009-09
New Economics Papers: this item is included in nep-pbe
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http://www.econ.ku.dk/english/research/publications/wp/dp_2009/0919.pdf/ (application/pdf)

Related works:
Journal Article: Selling digital music: business models for public goods (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:0919

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