why do consumers pay voluntarily? evidence from online music - t. regner and j. barria why do...
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Why Do Consumers Pay Voluntarily? Evidence from Online Music - T. Regner and J. Barria
Why Do Consumers Pay Voluntarily? Evidence from Online Music
Tobias Regner and Javier A. Barria
[email protected]@imperial.ac.uk
This work was partially supported by the EU-funded projects TIRAMISU (IST-2003-506983) and DANAE (IST-2004-507113). We are grateful to Maija Halonen-Akatwijuka and Osiris Parcero for valuable comments. Finally, John Buckman has been essential for this paper as he provided the
Magnatune data.
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Why Do Consumers Pay Voluntarily? Evidence from Online Music - T. Regner and J. Barria
Why Do Consumers Pay Voluntarily? Evidence from Online Music
• Analysis of payment behaviour– Alternative online music label: Magnatune– Customers choose price for an album from a given range– How much do they pay, what makes them pay more?
• Do consumers pay voluntarily?– Large data set obtained from Magnatune– Field study instead of data from lab experiments– Quantitative analysis
• Why do consumers pay voluntarily?– Online survey of frequent Magnatune customers– Qualitative/quantitative analysis– What is the underlying motivation for paying more than necessary?
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Why Do Consumers Pay Voluntarily? Evidence from Online Music - T. Regner and J. Barria
• Niche music label with 200 artists– Slogan: We're a record label. But we're not evil.– Revenues are evenly split between artist and Magnatune
• Various genres, relatively unknown artists• no Digital Rights Management
– Music files are unprotected– File quality and format is up to customer (MP3, WAV, ..)
• Comprehensive pre-purchase access– Free and unlimited streaming as well as online radio service
• Not just 30 second snippets– Free sampling of experience goods facilitates discovery of music
• Variable pricing– Customers are free to pay what they want– Price range from $5 to $18– Recommended price/default value: $8
Magnatune: Music Label and Online Store
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Why Do Consumers Pay Voluntarily? Evidence from Online Music - T. Regner and J. Barria
Data Set
• Sales numbers of the music label Magnatune www.magnatune.com
• 14,367 observations in total• Data from September 2003 to January 2005• 7,620 different customers• Majority (4,986) purchased just one album• Most albums bought by a customer: 49• On average customers bought 1.86 albums
• No reputation effects possible
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Why Do Consumers Pay Voluntarily? Evidence from Online Music - T. Regner and J. Barria
• Customer/artist ID• Payment• Date and time of purchase • Dummies
– Gender– Download or CD– Email left or not– Means of payment (credit card, PayPal)– Country– Music genre
• Total amount of purchases of customer • Number of a respective purchase of a customer
Data Set (2)
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Why Do Consumers Pay Voluntarily? Evidence from Online Music - T. Regner and J. Barria
Descriptive Stats
TABLE 3: DESCRIPTIVE STATISTICS
Variable obs mean median mode st.dev. min max
Payment [$] 14,367 8.197 8 8 2.301 5 24
Total purchases 7,620 1.86 1 1 2.657 1 49
time difference [days]
14.367 14.57 0 0 45.43 0 429
“female” dummy 10,718 0.087 0 0 0.282 0 1
“no e-mail” dummy 14,367 0.044 0 0 0.206 0 1
“CD” dummy 14,367 0.039 0 0 0.195 0 1
“PayPal” dummy 14,367 0.297 0 0 0.457 0 1
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Why Do Consumers Pay Voluntarily? Evidence from Online Music - T. Regner and J. Barria
Payment over Countries
TABLE 4: PAYMENT OVER COUNTRIES
Country obs. Mean median mode st.dev. min max
Canada 371 8.08 8 8 1.82 5 18
Switzerland 81 9.28 8 8 2.98 5 18
Germany 190 8.21 8 8 2.38 5 22.03
Spain 55 7.67 8 8 1.49 5 12.24
France 163 8.52 8 8 2.09 5 18
Israel 8 6.75 5 5 1.98 5 10
Italy 65 8.67 8 5 3.85 5 22.03
Japan 110 7.74 8 8 2.23 5 16
Mexico 30 5.90 5 5 1.42 5 10
Singapore 13 7.46 8 8 1.51 5 10
UK 366 8.65 8 8 2.36 5 18
USA 3,838 8.18 8 8 2.14 5 18
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Why Do Consumers Pay Voluntarily? Evidence from Online Music - T. Regner and J. Barria
Summary of Results
• Payment – Only 2,081 purchases (or 14.5%) were at the minimum of $5– Average payment for an album is $8.20– First payment of customers averages $8.36, 2nd payment averages $8.21
• Regression results (significant at (at least) 5%-level)– Anonymous customers tend to pay less– CD buyers tend to pay more– No difference between male and female customers– No country effects after accounting for GDP differences
• Types of consumers– Clustering of the observed transactions based on previous payment
• minimum, default, high (>$12) payment– $5 previous payment, average payment : $5.49– $8 previous payment, average payment: $8.01– > $12 previous payment, average payment: $12.29
– Payments type-dependent, subject-specific α
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Why Do Consumers Pay Voluntarily? Evidence from Online Music - T. Regner and J. Barria
Payment Patterns of 32 Customers with 15+ Transactions
id6252
0
2
4
6
8
10
12
1 3 5 7 9 11 13 15 17
id6252
id211
0
1
2
3
4
5
6
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8
9
1 3 5 7 9 11 13 15 17
id211
id960
0
2
4
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1 5 9 13 17 21 25 29 33 37 41 45 49
id960
id5174
0
2
4
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1 3 5 7 9 11 13 15 17 19
id5174
Default (with deviations): 20 consumers
(quasi-)
minimum: 4
>AVG: 5
Other patterns (decreasing payment): 3
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Why Do Consumers Pay Voluntarily? Evidence from Online Music - T. Regner and J. Barria
• Magnatune customers with at least 10 transactions• Anonymous participation• 236 responses out of 520 invitations sent out• Seven open-ended questions
– Benefits of purchasing music at Magnatune– Own payment (less, around above recommended price) and reasons for it– Estimate of customers’ average payments at Magnatune and reasons
• Eleven multiple choice background questions– Gender– Age– Country– Personal income– Educational background– Actively making music– Donations to charity– Own consideration of others’ decisions/opinions– "It is important to me what others think of me." – Reciprocity (positive/negative)
Online Survey
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Why Do Consumers Pay Voluntarily? Evidence from Online Music - T. Regner and J. Barria
• Clustering of textual responses into categories– Magnatune specific - technical 45.26%– Support of the artist 44.83%– Magnatune specific - idea/business 41.81%– Magnatune specific - music 30.17%– No DRM 29.74%– “Try before buy" 21.98%– Online music general 9.05%– Guilt 2.16%
• Probit regressions– Dependant variable: Own payment less/around/above recommended price– Explanatory variables
• Category entries• Survey scores (reciprocity, “own consideration”, “importance of others
opinion”, ..)• Gender, country, income, age, education, “actively making music”, “donations”
Qualitative/quantitative analysis
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Why Do Consumers Pay Voluntarily? Evidence from Online Music - T. Regner and J. Barria
• Own payment is less/around/above recommended price …– Less 13.6% (32)– Around 59,7% (141)– Above 26.7% (63)
• Regression results (***=1%, **=5%, *=10%)– Own payment is above recommended price explained by
• Score of positive reciprocity **• “Try before buy“ **• Middle income regions ***• R²=0.26
– Own payment is around recommended price explained by• Own consideration of others’ decisions/opinions *• R²=0.14
– Own payment is below recommended price explained by• Low income regions ***• Magnatune specific – technical **• R²=0.32
Key Preliminary Results
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Why Do Consumers Pay Voluntarily? Evidence from Online Music - T. Regner and J. Barria
• Consumers pay voluntarily at Magnatune– Average payment $8.20– Only 14.5% of purchases were at the minimum of $5– Payments appear to be type-dependant
• Why do they pay voluntarily?– Preliminary evidence that positive reciprocity drives behaviour
• Kind behaviour by Magnatune (free streaming etc.)• Score of positive reciprocity significant at 5%-level• “Try before buy“ category significant at 5%-level
– Own consideration of others’ decisions/opinions• Score affects “around”-payments at 10%-level
– Income– No significant effects for gender, education, “actively making
music”, “donations”, “guilt”, “fairness”
Conclusions