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Advancing the Concepts & Practices of Information Resources Management in Modern Organizations

Optimal Price Discount Schedule for Digital Music Downloads

Optimal Price Discount Schedule for Digital Music Downloads
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Author(s): Jan Sunjaya (University of Illinois, USA)
Copyright: 2002
Pages: 2
Source title: Issues & Trends of Information Technology Management in Contemporary Organizations
Source Editor(s): Mehdi Khosrow-Pour, D.B.A. (Information Resources Management Association, USA)
DOI: 10.4018/978-1-930708-39-6.ch176
ISBN13: 9781930708396
EISBN13: 9781466641358

Abstract

It is now commonly believed that the potential demand for music downloads is huge. Researchers at Webnoize found that in August 2001, music-lovers transferred more than three billion music files using websites like FastTrack, Audiogalaxi, and Gnutella. In September 2001, an estimated of one million users were logged on to the networks of music-sharing services at a given time. The music industry tapped into this huge potential demand. Bestbuy.com, pressplay.com, musicnet.com, and cdnow.com, to name a few, have already offered digital music downloads. It is still unclear, however, what revenue model should be used in this new paradigm. Adams and Yellen (1976) identify three bundling strategies: pure bundling, mixed bundling, and pure unbundling. In pure bundling, consumers are required to purchase either the entire bundle or nothing at all. This strategy is functionally similar to a subscription-based service, where music-lovers pay a subscription fee in order to download a limited number of songs per period. In pure unbundling, consumers buy individual components and put together their own bundle. The price of the bundle is the total price of the individual components. This strategy is similar to a pay-per-song service without any price discount, where music-lovers do not pay any subscription fee. In mixed bundling, consumers are offered a menu of different bundles, including individual components, at different prices. The price of a bundle is no more than the total price of its individual components. This strategy is similar to a pay-per-song service with price discounts.

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