Music for free? How free ad-funded downloads affect consumer choice

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 consumers by offering free downloads while relying on advertising as a revenue source. Using a latent-class choice-based conjoint analysis, we analyze the attractiveness of these business models from the consumer's perspective. Our findings indicate that advertising-based models have the potential to attract consumers who would otherwise refrain from commercial downloading, that they cannot threaten the dominance of download models like iTunes, and that current market prices for subscription services are unattractive to most consumers. © 2010 Academy of Marketing Science.