Can digital consumption boost physical consumption? The effect of online music streaming on record sales

Abstract

Despite a consensus that sales of physical albums have declined with the increasing prevalence of digital music, this seemingly unequivocal observation may not be true. Physical formats still occupy a fraction of the market, with a noticeable increase in the sales of physical albums in a few countries where digital media is predominant. This study empirically examines the impact of two online music channels (streaming and downloading) on physical album sales in the South Korean music market. By utilizing a unique dataset representing nationwide music sales, our empirical findings suggest that the growth in digital music services can be positively associated with an increase in physical album sales. In particular, this finding is more salient for male, solo, and lesser-known artistes. This empirical evidence implies that burgeoning music streaming services (access-based digital consumption) may lead to another ownership-based physical consumption. Our findings provide useful managerial implications for practitioners in countries where streaming services are growing.