Changing Their Tune: How Consumers' Adoption of Online Streaming Affects Music Consumption and Discovery

Abstract

Constructing a unique panel data set of individual consumers’ listening behavior on digital music platforms, e.g., iTunes and Spotify, we study the effect of adopting streaming services on individual music consumption. Achieving quasi-randomization via a matching procedure, we estimate the changes in quantity, variety and new music discovery after adopting a streaming service like Spotify. Adopting streaming services leads to substantial increases in quantity, variety in any measure, plays of new content, and discovery of new favorites. It is also associated with a large drop in concentration. We document that adopting Spotify leads to more discovery of highly valued music. Relative to using iTunes, adopting Spotify raises repeat listening for consumers’ best new discoveries, although - consistently with the marginal variety on Spotify being free - lowers repeat listening for the average new discovery relative to non-adopters. We discuss the implications for platforms, labels, artists, and consumers.