—This paper proposes an alternative pricing scheme for the digital music market, where the musician's differentiated characteristics such as fame, popularity, and listener share — in the form of consumer's brand premium multiplier — is incorporated into the pricing decision by the record label. We consider consumers are differentiated by two types of characteristics: the brand premium multiplier towards the musician, and the general preference to music. We argue that in the co-existence of free music streaming, the retail price of a musical product should be allowed to vary in a manner that reflects the differences in market environment and the musician's characteristics. The results of the proposed model provide a toolkit for the recording industry to effectively price its products in a market that is constantly evolving.
—Brand premium, music streaming, pricing, self-selection.
The authors are with the Department of Industrial and Manufacturing Systems Engineering, The University of Hong Kong, Pokfulam, Hong Kong (e-mail: firstname.lastname@example.org, email@example.com).
Cite: Tobey H. Ko and Henry Y. K. Lau, "A Brand Premium Pricing Model for Digital Music Market," International Journal of Trade, Economics and Finance vol.6, no.2, pp. 117-124, 2015.