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Free Music Downloads: Petty Theft or Purchase Inducement? [Preliminary] Dr. John P. Haisken-DeNew (RWI-Essen, DIW-Berlin and IZA-Bonn) jhaiskendenew@rwi-essen.de Guido Olschewski (Uni Mannheim) Music Downloads Background

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free music downloads petty theft or purchase inducement preliminary

Free Music Downloads: Petty Theft or Purchase Inducement?[Preliminary]

Dr. John P. Haisken-DeNew

(RWI-Essen, DIW-Berlin and IZA-Bonn)

jhaiskendenew@rwi-essen.de

Guido Olschewski

(Uni Mannheim)

music downloads
Music Downloads
  • Background
    • Never before has there been so much interest on the side of consumers in downloading or sharing music, stored as files.
    • Until recently, these high quality compressed music files had been distributed essentially in violation of copyright restrictions.
    • Induce the music industry to counter with aggressive lawsuits against providers of peer-to-peer sharing software, internet providers and individual internet users involved in distributing music.
    • Claim by music industry that music downloads are leading to the demise of industry.
    • What can be said about music online purchases in the face of free music (MP3) downloads ?

© e-Living Consortium, 2003

music downloads3
Music Downloads
  • Broadband vs Music
    • In 2002, ISPs reported that 60% of data traffic through their connections were in the form of large music, file and software files: ZDNet UK (2002).
    • Recent attempts by ISPs to prevent disclosing their customers identities may be simply protecting the large number of users who pay fees for flat-rate and broadband-access.  
    • Ironically, major record companies generally belong to very large conglomerates which earn revenue in broadband.
    • For example Warner Music belongs to AOL Time Warner, which is earns revenue through one of the worlds biggest ISPs, America Online (AOL). Sony Music is a branch of Sony Corporation, a huge manufacturer of computer hardware.

© e-Living Consortium, 2003

estimation strategy
Estimation Strategy
  • Discrete Events (Yes, No)
    • Downloaded Free MP3 Music File
    • Purchased CDs Online
      • Can estimate by Probit
        • Examine Marginal Effects
        • Compare Relative Magnitudes
      • However are these correlated ??
        • JOINT decision to Download AND Purchase
        • Suggests BIVARIATE Probit
        • Error terms allowed to correlate
        • Test significance of “rho” correlation term

© e-Living Consortium, 2003

estimation strategy cont d
Estimation Strategy Cont’d
  • Conditional Probabilities …
    • (a) What is unconditional Prob of Purchase ?
    • (b) What is conditional Prob of Purchase ? Prob (Purchase=Yes | Download=Yes)
    • How do these probabilities differ by group ?
    • Complementary Behaviour
        • [ Prob(Conditional) - Prob(Unconditional) ] > 0
        • Prob(Purchase) increases given download
    • Substitution Behaviour
        • [ Prob(Conditional) - Prob(Unconditional) ] < 0
        • Prob(Purchase) decreases given download

© e-Living Consortium, 2003

slide6
Does Conditional Probability of Online Music Purchase Increase with Online Music Download?Demographics

© e-Living Consortium, 2003

slide7
Does Conditional Probability of Online Music Purchase Increase with Online Music Download?Labour Market / Income

© e-Living Consortium, 2003

slide8
Does Conditional Probability of Online Music Purchase Increase with Online Music Download?ICT Access / Profile

© e-Living Consortium, 2003

slide9
Does Conditional Probability of Online Music Purchase Increase with Online Music Download?Country / Time Differences

© e-Living Consortium, 2003

conclusions
Conclusions

Which Factors Increase Online Purchase ?

  • Very Strong Effects:
    • High Internet Use Frequency
    • High PC Use
    • Early Adopter
  • Strong Effects
    • High Internet Use Duration
    • High PC Use Duration
    • Male, Upper Social, Employed, ISDN/Broadband

© e-Living Consortium, 2003

conclusions11
Conclusions

Positive Correlation Download + PurchaseNo Substitution Effects !

  • Unconditional Prob 0.0339
  • Conditional Prob 0.0467
  • Increase in Prob 0.0128
  • Increase in % 37.76

Complements: Great Britain, Germany,Norway

Substitutes: Italy, Israel

© e-Living Consortium, 2003

thank you
Thank You!

© e-Living Consortium, 2003

estimation
Estimation

Bivariate probit regression Number of obs = 11533

Wald chi2(46) = 1859.25

Log likelihood = -3776.5303 Prob > chi2 = 0.0000

------------------------------------------------------------------------------

| Coef. Std. Err. z P>|z| [95% Conf. Interval]

-------------+----------------------------------------------------------------

mudownl |

age | -.0265072 .0021004 -12.62 0.000 -.030624 -.0223904

sex | .2341732 .0420907 5.56 0.000 .1516769 .3166695

uni | -.1720576 .0510052 -3.37 0.001 -.272026 -.0720892

dumIsdn | .1277579 .0514209 2.48 0.013 .0269749 .2285409

social | .0166154 .0027923 5.95 0.000 .0111427 .0220881

freqPcUse | .041728 .0150388 2.77 0.006 .0122525 .0712034

pctime | -.0104552 .0070213 -1.49 0.136 -.0242166 .0033062

tvsets | .1313765 .0172888 7.60 0.000 .097491 .1652619

early | .0127147 .0026396 4.82 0.000 .0075412 .0178881

netfreqhom | .2571731 .0176602 14.56 0.000 .2225597 .2917866

netperday | .1126703 .0156744 7.19 0.000 .0819491 .1433915

dumMar | -.08491 .0483833 -1.75 0.079 -.1797395 .0099195

jobstatus | .0959997 .1108964 0.87 0.387 -.1213533 .3133527

student | .1142265 .1155038 0.99 0.323 -.1121567 .3406097

noworkforce | -.0572187 .1300324 -0.44 0.660 -.3120776 .1976401

respon | -.0252674 .0133805 -1.89 0.059 -.0514927 .0009579

monthinc | -.0000187 .0000108 -1.73 0.083 -.0000398 2.46e-06

dumUK | -.179158 .0710558 -2.52 0.012 -.3184248 -.0398912

dumIt | -.1112875 .0743304 -1.50 0.134 -.2569723 .0343974

dumNo | .0723801 .0663971 1.09 0.276 -.0577558 .202516

dumIs | .2298413 .074217 3.10 0.002 .0843786 .375304

satisf | -.0108374 .0067784 -1.60 0.110 -.0241229 .0024481

dum2002 | .1205202 .0412746 2.92 0.004 .0396234 .201417

_cons | -2.83889 .1998663 -14.20 0.000 -3.230621 -2.44716

-------------+----------------------------------------------------------------

© e-Living Consortium, 2003

estimation14
Estimation

-------------+----------------------------------------------------------------

onlshopCD |

age | -.0100921 .0028111 -3.59 0.000 -.0156016 -.0045825

sex | .1234441 .0603814 2.04 0.041 .0050987 .2417895

uni | -.018232 .0707144 -0.26 0.797 -.1568297 .1203658

dumIsdn | .0803341 .0690373 1.16 0.245 -.0549764 .2156446

social | .0106944 .0038676 2.77 0.006 .003114 .0182748

freqPcUse | .0749615 .0286828 2.61 0.009 .0187443 .1311787

pctime | -.0022825 .0096153 -0.24 0.812 -.0211282 .0165633

tvsets | .0766748 .0238573 3.21 0.001 .0299153 .1234344

early | .0239991 .003847 6.24 0.000 .0164591 .0315391

netfreqhom | .186352 .0311492 5.98 0.000 .1253006 .2474033

netperday | .0231634 .0236754 0.98 0.328 -.0232396 .0695664

dumMar | -.0690333 .0663172 -1.04 0.298 -.1990126 .060946

jobstatus | .1941767 .2146144 0.90 0.366 -.2264599 .6148133

student | -.0225209 .2235367 -0.10 0.920 -.4606448 .415603

noworkforce | .4177816 .2298023 1.82 0.069 -.0326226 .8681858

respon | .0180751 .0187075 0.97 0.334 -.0185909 .054741

monthinc | -1.31e-06 .0000132 -0.10 0.921 -.0000272 .0000246

dumUK | .075807 .0845872 0.90 0.370 -.0899809 .2415948

dumIt | -.9233313 .133345 -6.92 0.000 -1.184683 -.66198

dumNo | -.424074 .0874926 -4.85 0.000 -.5955563 -.2525917

dumIs | -.735795 .1233982 -5.96 0.000 -.9776512 -.4939389

satisf | -.0090422 .0094556 -0.96 0.339 -.0275748 .0094904

dum2002 | -.0214423 .0577932 -0.37 0.711 -.1347148 .0918302

_cons | -4.091618 .3360348 -12.18 0.000 -4.750234 -3.433002

-------------+----------------------------------------------------------------

/athrho | .1710371 .0391085 4.37 0.000 .0943859 .2476883

-------------+----------------------------------------------------------------

rho | .1693886 .0379864 .0941066 .2427444

------------------------------------------------------------------------------

Likelihood-ratio test of rho=0: chi2(1) = 19.3495 Prob > chi2 = 0.0000

© e-Living Consortium, 2003