J. of the Acad. Mark. Sci. (2011) 39:777–794 DOI 10.1007/s11747-010-0230-5

ORIGINAL EMPIRICAL RESEARCH

Music for free? How free ad-funded downloads affect consumer choice
Dominik Papies & Felix Eggers & Nils Wlömert

Received: 26 January 2010 / Accepted: 29 September 2010 / Published online: 20 October 2010 # Academy of Marketing Science 2010

Abstract The market for digital content (e.g., music or movies) has been affected by large numbers of Internet users downloading content for free from illegitimate sources. The music industry has been exposed most severely to these developments and has reacted with several different online business models but with only limited success thus far. These business models include attempts to attract …show more content…

We therefore contribute to the literature by empirically analyzing the effect of a free online channel on consumer choice for a music download service. Based on the theoretical framework for the analysis of channel additions by Geyskens et al. (2002), we examine the attractiveness of multiple business models, i.e., DST, subscription model, and ad-based model, and predict choices for download stores and the level of competition between the channels using a latent-class choice-based conjoint approach

(DeSarbo et al. 1995). By analyzing segments, we shed light on consumer preferences in the music download market and show how the identified segments differ in their choice behavior and willingness-to-pay. Moreover, by comparing segments, we are able to explain different types of consumer behavior, which we base on behavioral factors that we derived from extant research. Based on the empirical results, we show that content owners should have a strong interest in adding free, advertising-based outlets to their distribution chains because they attract new customers rather than cannibalizing incumbent business models. These findings are relevant for (1) content owners in the music industry and other branches of the creative industries looking to decide which content distributors are the most promising with which to contract and which prices and