BISE – RESEARCH PAPER Music as a Service as an Alternative to Music Piracy? An Empirical Investigation of the Intention to Use Music Streaming Services Although there are no final results of music piracy’s influence on music industry revenues, music pirates are an important target group for the music industry. Music as a Service (MaaS) represents a new form of consuming music. The streaming service is offered on a monthly subscription or an ad-financed basis. Initial user surveys indicated that many music pirates also use such streaming offers. For this empirical study, we questioned 132 music pirates. We conclude that music pirates have a positive attitude towards MaaS. Although the free consumption of music received higher approval, MaaS – owing to social sharing functions and a new pricing model – is a viable alternative to illegal music consumption. DOI 10.1007/s12599-013-0294-0 music piracy (Liebowitz 2006; Zentner The Authors This article is also available in Ger- 2006), studies have focused on aspects man in print and via http://www. of illegal music downloads. In the litera- wirtschaftsinformatik.de:DörrJ,Wag- ture, two main types of music pirates are Dr. Jonathan Dörr ner T, Benlian A, Hess T (2013) Mu- Dipl.-Volksw. Thomas Wagner () identified. The first group – the so-called sic as a Service als Alternative für savers – experience the current prices of Prof. Dr. Thomas Hess Musikpiraten? Eine empirische Unter- legal music as unfair and too expensive Munich School of Management suchung zur Nutzungsintention von (Al-Rafee and Cronan 2006;Levinetal. Institute for Information Systems Streaming-Services für Musik. WIRT- 2004). The second group – the so-called and New Media SCHAFTSINFORMATIK. doi: 10.1007/ Ludwig Maximilians University s11576-013-0387-x. samplers – use illegal downloads mainly Munich (LMU) to preview a song in order to buy it later Ludwigstrasse 28 © Springer Fachmedien Wiesbaden if they like it (Bhattacharjee et al. 2003b; 80539 Munich 2013 Peitz and Waelbroeck 2004). Germany There have been numerous discussions [email protected] about illegal copying. Digital rights man- url: http://www.wim.bwl.lmu.de agement systems (DRMS) seek to pro- 1Introduction tect digitally saved music from unau- Prof. Dr. Alexander Benlian thorized sharing via the internet. DRMS Department of Law and Economics In 2011, record labels generated 32 % consist of encryptions, authorization def- Chair of Information Systems oftheirglobalturnoverviadigitalsales inition languages, and watermarks. These & Electronic Services channels, a year-on-year growth of 8 %. security mechanisms were introduced to Darmstadt University of Technology Despite this positive development, global regulate the access and usage of the (TU Darmstadt) music industry revenues decreased by digital content for a specific group as Hochschulstrasse 1 31 % between 2004 and 2010 (IFPI well as to prosecute violations of laws 64289 Darmstadt (Hess and Ünlü 2004). However, the cus- Germany 2012, p. 6). Meanwhile, 29.8 million users shared illegal and free music in Europe’s tomer now experiences restrictions while top five markets in 2009 (IFPI 2010, using the music file (Buxmann et al. Received: 2011-03-21 2005). While pirates are skilled at cir- Accepted: 2013-05-17 p. 11). At the same time, only 35 % of cumventing DRMS, legal users are scared Accepted after five revisions by members of illegal networks also paid for off by the technical restrictions result- Prof. Dr. Heinzl. music (IFPI 2012,p.16).Withinthepast few years, the initially very popular peer- ing from the file protection, such as to-peerexchangessuchasBitTorrentand the limited choices of mobile devices or eDonkey (Grasmugg et al. 2003)havebe- the limited distribution options (Sinha gun to be replaced by so-called share- et al. 2010). Therefore, the application hosters such as Rapidshare for distribut- of DRMS may result in a drop in sales ing digital music illegally (IFPI 2010, (Jaisingh 2007). p. 19). By means of warnings and lawsuits, Besides the primary question of the record labels early attempted to stop correlation between the drop in sales and illegal downloading. Already in 2000, Business & Information Systems Engineering BISE – RESEARCH PAPER Recording Association of America sued able to empirically show that legal mu- The remainder of this study is struc- the illegal music provider Napster (then sic download platforms such as Apple’s tured along seven sections. First, we state just two years old). At the time, Napster iTunes store are perceived as a substitute our motivation. Section 2 provides an had already managed to acquire a user to music piracy owing to their adequate overview of online music offers in gen- base of 44.6 million (Freedman 2003; price-quality ratio. eral, and especially MaaS. In Sect. 3,we Liebowitz 2006). Music pirates have con- To date, piracy’s de facto impact on present the Theory of Planned Behavior sidered themselves safe because the la- the revenues of the content industry can- as well as our research hypotheses and, bels’ legal departments do not have the not be clearly identified. On the one in Sect. 4, the methodological approach. capacity to properly prosecute each case hand, several studies postulate a nega- Section 5 contains our empirical results, (Al-Rafee and Cronan 2006; Plowman tive correlation (e.g., Sinha and Mandel Sect. 6 our results and an assessment and Goode 2009). 2008; Upshaw and Babin 2010;Wool- of the limitations, while Sect. 7 sum- Besides the protection of music, legal ley 2010), while some studies do not see marizes the results and future research download offers have been steadily im- any effect or a positive effect on revenues opportunities. proved. For instance, consumers can il- (e.g., Oberholzer-Gee and Strumpf 2007; legally download songs from exchange Peukert and Claussen 2012). platforms or from other websites and can A new way to consume digital music 2 Background Information: then decide whether to purchase them af- is now available in the form of MaaS. Current Music Offers on the terwards. The literature describes this as- In contrast to known music offers, so- Internet pect as sampling (Peitz and Waelbroeck called à-la-carte downloads such as the iTunes Store or Amazonmp3, MaaS is 2006). Bounie et al. (2007) and Gopal 2.1 Online Music Offers characterized by two features: instead of et al. (2006) discovered that better sam- downloading a song, music is streamed pling may reduce illegal downloads. It while it is consumed, and users pay a sub- Currently there are three legal distribu- has also been shown that individuals tend scription fee instead of paying per down- tion channels for digital music on the in- to buy music recommended by contacts load. Hence, purchasing and download- ternet which allow users to choose di- in their personal networks (Bounie et al. ing are substituted by a monthly sub- rectlyfromarangeoftitles,albums, 2007;HinzandEckert2010). With the scription fee or an ad-financed stream- and interpretations. In this context, ser- integration of the social network Ping in ing service. First results show that mu- vices similar to web radio outlets such 2010, Apple tried to serve these customer sic pirates also use MaaS, and some have as last.fm and Pandora are not consid- needs. subsequently given up illegal download- ered, since here users are unable to al- Price-setting has also been investigated ing (IFPI 2010,p.9).Ourstudyexam- ter prearranged playlists. Figure 1 pro- several times, since the vast amount of ines whether MaaS offers are accepted by vides an overview of the three legal ser- music pirates seek to legitimize their ille- music pirates as a purchase option; there- vices – differentiated along consumption, gal downloading by pointing to the music fore, it contributes to new technology payment method, and recommendation industry’s unfair price policy (Al-Rafee acceptance research. To date, acceptance system. The offers are arranged from left and Cronan 2006). With a price of €0.99 studies have examined a new technol- to right, following their occurrence. per download, Buxmann et al. (2007) ogy’s adaptability. In this context, it was After a strong drop in revenues at propose a reduction of the price in or- disregarded that comparable technolo- the turn of the millennium, the music der to increase profits. Deviating from gies were already in use, which would industry began to license digital music the initial uniform price-setting strat- make technology substitution more suit- for downloading via the internet. Such egy, the literature contains recommen- able (Polites and Karahanna 2012,p.22). consumption is called download-to-own dations for differentiating the price for Such product usage will be considered in and it is mainly charged for by pay-per- different customer groups (Sandulli and our study, since we consider the relative download. Initially secured by DRMS, Martin-Barbero 2007; Sinha et al. 2010) advantage of a new product – MaaS – since 2009 songs can be downloaded on or the songs offered to them (Buxmann in comparison to an existing product – any device without authentication pro- et al. 2005). Danaher et al. (2010)were illegal downloading. cedures; they can also be shared without Fig. 1 Current online music consumption services Business & Information Systems Engineering BISE – RESEARCH PAPER restriction. However, songs can still con- MaaS provider’s core competency is con- cantly influenced especially by the mu- tain a watermark to detect their origin tent distribution through which it can sic quality offered and the contract du- on exchange platforms (Dörr et al. 2009). now be considered a media company in ration. After analyzing data on the web DRMS is still included in consumption the broad sense (Schumann and Hess radio outlet last.fm, Oestreicher-Singer via download-to-rent. In this case, music 2009,p.12).Thedistributioncoincides and Zalmanson (2009)identifiedacor- files are also located on the user’s device, with the consumption, since the content relation between willingness to pay and but may only be played after an online is streamed and only available during the community activities.