Selling digital music: business models for public goods

Research output: Contribution to journalJournal articleResearchpeer-review

Jens Leth Hougaard, Mich Tvede

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.
Original languageEnglish
JournalNetnomics
Volume11
Issue number1
Pages (from-to)85-102
Number of pages18
ISSN1385-9587
DOIs
Publication statusPublished - 2010

ID: 21283674