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  • May 2010
  • Article
  • Journal of Marketing

Bye Bye Bundles: The Unbundling of Music in Digital Channels

By: Anita Elberse
  • Format:Print
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Abstract

Fueled by digital distribution, unbundling is prevalent in many information industries. What is the effect of this unbundling on sales? And what bundle characteristics drive this effect? I empirically examine these questions in the context of the music industry, using data on weekly digital-track, digital-album, and physical-album sales for all titles released by a sample of over 200 artists. I analyze sales dynamics from January 2005 to April 2007-a period in which the share of unbundled units jumped from roughly one-third to two-thirds of total unit sales. My modeling framework, a system of an "album-sales" and a "song-sales" equation estimated using the seemingly unrelated regression method, explicitly accounts for the interaction between sales for the bundle and its components. I find that revenues decrease significantly as digital downloading becomes more prevalent because consumers switch from buying bundles (albums) to cherry-picking their favorite components (songs) on those bundles. The number of items included in a bundle (a measure of its "objective" value) does not emerge as a significant moderator of this effect. Instead, I find that bundles with items that are more equal in their appeal and bundles offered by producers with a strong reputation suffer less from the negative impact of the shift to mixed bundling in online channels.

Keywords

Sales; Distribution Channels; Framework; Mathematical Methods; Revenue; Reputation; Online Technology; System; Information Industry; Music Industry

Citation

Elberse, Anita. "Bye Bye Bundles: The Unbundling of Music in Digital Channels." Journal of Marketing 74, no. 3 (May 2010).
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About The Author

Anita Elberse

Marketing
→More Publications

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More from the Author
  • Chip and Joanna Gaines' Magnolia Network By: Anita Elberse and Julia McNicholas
  • Paris Saint-Germain: Building One of the World's Top Sports Brands By: Anita Elberse and David Moreno Vicente
  • Live Nation and Pharrell Williams By: Anita Elberse and Kate Christensen
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