Conversion in Music Streaming Services

Abstract

Demand spillovers between distribution channels are critical for revenue streams in the music industry. Drawing on consumption capital theory, this study investigates the impact of a subscription (unsubscription) or upgrade (downgrade) in music streaming on live, physical, and digital music consumption. The propensity score matching approach applied to a biannual panel with six waves indicates that conversion in music subscriptions spills over to the live market and changes willingness to pay (WTP) and demand for live events. Converting from no streaming or free streaming to a premium subscription leads to a particularly high surplus in WTP and demand for live music. Unsubscribing or downgrading a music subscription decreases WTP and demand for live events. However, changes in music subscriptions are rather unrelated to physical and digital purchases. A scenario analysis indicates that deleting the free streaming option outperforms restricting the features available to free users. The authors provide contingencies of this finding.