 Optimal Pricing Model of Digital Music: Subscription, Ownership or Mixed?Shengli Li, Qiuyue Luo, Liangfei Qiu and Subhajyoti Bandyopadhyay Production and Operations Management, 2020, vol. 29, issue 3, 688-704 Abstract: Traditionally, consumers purchase physical music (often in the form of CDs or cassettes) from local retailers. With the development of Internet technology, the market share of digital music has grown rapidly in recent years. Unlike physical music, digital music is provided by several emerging digital music providers through the Internet to consumers. Pricing models of digital music are also drastically different from those of physical music. In this study, we identify three common schemes for selling digital music: ownership, subscription and mixed pricing models. Under the ownership model, consumers purchase and download their preferred songs and enjoy music using their local devices. Under the subscription model, music is provided through an online streaming service. The mixed pricing model is a combination of the previous two. Our paper explores and compares the three pricing models. Through a stylized model, we find that several factors, including the advertisement revenue rate and consumers’ reservation value for the music service, have crucial effects on the comparison of the three pricing models. Date: 2020 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:popmgt:v:29:y:2020:i:3:p:688-704 Ordering information: This journal article can be ordered from Access Statistics for this article Production and Operations Management is currently edited by Kalyan Singhal More articles in Production and Operations Management from Production and Operations Management Society |
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