on-demand streaming services and music industry revenues ... · 1 introduction 2 theory 3 method 4...
TRANSCRIPT
![Page 1: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/1.jpg)
Dr. Nils WlömertInstitute for Interactive Marketing & Social Media, WU Vienna
Vienna, September 28, 2016
On-demand Streaming Services and Music Industry Revenues
- Insights from Spotify's Market Entry
![Page 2: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/2.jpg)
Agenda
1 Introduction
2 Theory
3 Method
4 Sample & results
5 Implications
Wlömert, N. and Papies, D. (2016): On-Demand Streaming Services and Music Industry Revenues - Insights from Spotify's Market Entry. International Journal of Research in Marketing, 33(2), 314-327.
![Page 3: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/3.jpg)
Will streaming reverse the trend?
11.10.20163 STREAMING SERVICES AND MUSIC INDUSTRY REVENUES - NILS WLÖMERT
Global Music Industry Revenue (US$ billions, trade value)
![Page 4: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/4.jpg)
Streaming is becoming more popular
11.10.20164 STREAMING SERVICES AND MUSIC INDUSTRY REVENUES - NILS WLÖMERT
Number of worldwide
Spotify users[millions]
![Page 5: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/5.jpg)
The study investigates the influence of streaming services on music purchases and revenue
11.10.20165 STREAMING SERVICES AND MUSIC INDUSTRY REVENUES - NILS WLÖMERT
(1) What are the effects of the adoption of free and paid streaming services on music expenditures in other channels?
(2) Can revenue from streaming services compensate for potential losses that streaming services cause in other distribution channels, and what factors moderate this effect?
Research questions:
![Page 6: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/6.jpg)
Agenda
1 Introduction
2 Theory
3 Method
4 Sample & results
5 Implications
![Page 7: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/7.jpg)
How can firms and artists generate revenue?
11.10.20167 STREAMING SERVICES AND MUSIC INDUSTRY REVENUES - NILS WLÖMERT
Music purchases Sales revenue
Free Streaming Ad revenue
Paid Streaming Subscription revenueOverall revenue
+
Pre-adoption expenditures
+
+
RQ2RQ1
![Page 8: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/8.jpg)
Agenda
1 Introduction
2 Theory
3 Method
4 Sample & results
5 Implications
![Page 9: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/9.jpg)
Challenges in identifying cannibalization effects
11.10.20169 STREAMING SERVICES AND MUSIC INDUSTRY REVENUES - NILS WLÖMERT
Spotify users are likely to spend more money on music products than non-users because they are generally more interested in music
It is difficult to separate substitutability or complementarity of goods from spurious correlation (Gentzkow 2007)
We control for unobserved individual effects by focusing on differences in behavior over time (Wooldridge 2002; Bronnenberg et al. 2010)
![Page 10: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/10.jpg)
A longitudinal study was designed
11.10.201610 STREAMING SERVICES AND MUSIC INDUSTRY REVENUES - NILS WLÖMERT
timeJan Feb May Jun
1 2 3 4 5 6
Oct
7
Dec
8
Mar Jul Feb
9
2012 2013
Music expenditures & service usage per person per month
Difference-in-Difference estimator (e.g., Wooldridge 2002)
![Page 11: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/11.jpg)
Public awareness “Spotify“
11.10.201611 STREAMING SERVICES AND MUSIC INDUSTRY REVENUES - NILS WLÖMERT
Google Trends Index for "Spotify"
![Page 12: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/12.jpg)
The estimation exploits the longitudinal dimension
11.10.201612 STREAMING SERVICES AND MUSIC INDUSTRY REVENUES - NILS WLÖMERT
change in log revenues
errorterm
(1)
(2)
change in log expenditures
free streaming service adoption
paid streaming service adoption
Identifying assumption: unobserved preferences that are related to adoption and expenditures are relatively stable over time (e.g., Wooldridge 2002)
log of pre-adoption expenditures
time dummies
![Page 13: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/13.jpg)
Agenda
1 Introduction
2 Theory
3 Method
4 Sample & results
5 Implications
![Page 14: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/14.jpg)
More than 2,700 respondents were repeatedly interviewed
11.10.201614 STREAMING SERVICES AND MUSIC INDUSTRY REVENUES - NILS WLÖMERT
Cooperation with all major labels (Universal, Sony, EMI, Warner)
Participants were recruited via the label’s online consumer panels
Incentive: free CD of choice
9 survey waves over the course of 14 months
N = 2,759 (participated in all waves of the survey)
Sample is representative for the most important consumer group
Variables Music market Sample
Age (mean) 38a 37
Gender (% male) 60a 57
Daily music listening (h:m) 3:42b 3:58 (3:11)c
a BVMI (2013), b ARD/ZDF (2013), c Median
![Page 15: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/15.jpg)
27% (8%) of participants have adopted a free (paid) streaming service
11.10.201615 STREAMING SERVICES AND MUSIC INDUSTRY REVENUES - NILS WLÖMERT
* Share of participants, that had used the respective service at least once
Streaming service user share (cumulated)*
![Page 16: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/16.jpg)
The adoption of a FSS (PSS) reduces expenditures by 11% (24%)
11.10.201616 STREAMING SERVICES AND MUSIC INDUSTRY REVENUES - NILS WLÖMERT
Music Expenditures
Free Streaming Service Adoption
Paid Streaming Service Adoption
-11%*
-24%*
n.s.Usage Intensity
+ 1%
-0,81%**
-0,77%**
Individuals (i): 2,058Observations (t): 8Total observations (N): 16,464
n.s. = not signifikant* p<0.05
** p<0.01
![Page 17: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/17.jpg)
Overall music industry revenue
11.10.201617 STREAMING SERVICES AND MUSIC INDUSTRY REVENUES - NILS WLÖMERT
Label revenue = sales
revenue - 30% retail
margin
Label revenue =
subscription revenue -
50% (taxes & retail
margin)
Revenue per stream:
0.001 EUR
Label revenue =
streams per month x
payout per stream
Overall music industry revenue
Sales revenue Subscription revenue Advertising revenue
![Page 18: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/18.jpg)
The net effect of PSS is positive, the effect of FSS depends on the pre-adoption expenditure level
11.10.201618 STREAMING SERVICES AND MUSIC INDUSTRY REVENUES - NILS WLÖMERT
Music label revenue
Free Streaming Service Adoption
Paid Streaming Service Adoption
n.s.
+49%**
Pre-adoption expenditures +1%
-0,12%**
n.s.
Individuals (i): 2,224Observations (t): 8Total observations (N): 13,344
n.s. = not signifikant* p<0.05
** p<0.01
![Page 19: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/19.jpg)
FSS are only profitable for previously inactive consumers
11.10.201619 STREAMING SERVICES AND MUSIC INDUSTRY REVENUES - NILS WLÖMERT
Mean0 Max
-0.4
-0.2
0
0.2
0.4
Effect of FSS on revenue
Pre-adoption expenditures
![Page 20: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/20.jpg)
External validation & aggregate level analyses
11.10.201620 STREAMING SERVICES AND MUSIC INDUSTRY REVENUES - NILS WLÖMERT
Free service Paid service
Inactive Active Inactive Active
User share inactive/active 14% 86% 9% 91%
Overall adopters in DE 2014a 6,400,000 1,400,000
Number of adopters by group 896,000 5,504,000 126,000 1,274,000
Revenue contribution by user .33€ .32€ 5.14€ 4.01€
Revenue contribution by group 295,680€ 1,761,280€ 647,640€ 5,108,740€
Overall revenue/month 7,813,340€
Mean music expenditures DEa -- 5.00€ -- 5.00€
Cannibalization rate -- 14% -- 21%
Cannibalization by user -- -.70€ -- -1.05€
Cannibalization by group -- -3,852,800€ -- -1,337,700€
Overall cannibalization/month -5,190,500€
Overall net effect/month 2,622,840€
9,000,000€
2,250,000€
aIFPI (2015)
![Page 21: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/21.jpg)
Influence of payout rate and previously inactive consumer share on FSS revenue
11.10.201621 STREAMING SERVICES AND MUSIC INDUSTRY REVENUES - NILS WLÖMERT
Payout per stream [EUR]
Net effect of FSS adoption
[million Euros]
0 .001 .002 .003 .004 .005
-2
0
2
4
-4
6
10
8
![Page 22: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/22.jpg)
Agenda
1 Introduction
2 Theory
3 Method
4 Sample & results
5 Implications
![Page 23: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/23.jpg)
STREAMING SERVICES AND MUSIC INDUSTRY REVENUES - NILS WLÖMERT23 11.10.2016
Implications
Music Labels
Aim to attract as many users as possible (e.g., to prepare IPO)
Currently not profitable due to high free user share
To ensure long-term profitability, stronger incentives for free users to convert to the paying customers
Streaming Services
Streaming services cannibalize demand from other channels
Overall positive revenue effect
Focus on channels that directly generate revenue
Use free services to target inactive consumers and to convert users
Increase utility difference between the free and the paid version of the service (e.g., through windowing), as conversion is weak
![Page 24: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/24.jpg)
DEPARTMENT OF MARKETINGInstitute for Interactive Marketing & Social MediaWelthandelsplatz 1, 1020 Vienna, Austria
Dr. Nils Wlömert
T +43-1-313 36-4958F +43-1-313 [email protected]/imsm
STREAMING SERVICES AND MUSIC INDUSTRY REVENUES - NILS WLÖMERT24
Thank you!
11.10.2016
![Page 25: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/25.jpg)
Individual level expenditures per media type
11.10.201625 STREAMING SERVICES AND MUSIC INDUSTRY REVENUES - NILS WLÖMERT
CD albums
CD singles
DVDs
Vinyl albums
DTO albums
DTO tracks
Premium subscriptions
Other subscriptions
expenditures
![Page 26: On-demand Streaming Services and Music Industry Revenues ... · 1 Introduction 2 Theory 3 Method 4 Sample & results 5 Implications Wlömert, N. and Papies, D. (2016): On-Demand Streaming](https://reader033.vdocuments.us/reader033/viewer/2022042222/5ec92b7578a405110a6fee06/html5/thumbnails/26.jpg)
Individual level listening behavior per media type
11.10.201626 STREAMING SERVICES AND MUSIC INDUSTRY REVENUES - NILS WLÖMERT
Ad-funded streaming (Spotify & Simfy)
Premium subscriptions
Other free streaming
Terrestrial radio
Video streaming
Digital tracks stored on devices
Physical products