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Fighting Free with Free: Freemium vs. Piracy

Author

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  • Antoine Dubus

    (D-MTEC - Department of Management, Technology, and Economics [ETH Zürich] - ETH Zürich - Eidgenössische Technische Hochschule - Swiss Federal Institute of Technology [Zürich])

  • Christine Halmenschlager
  • Patrick Waelbroeck

Abstract

In this article, we show how freemium business models can deter piracy. We analyze a simple freemium model in which a firm offers both a free version and a premium version. The firm can restrict the use of the free version. Consumers can choose between the free and the premium version, but can also get an illegal digital copy. More restrictions can increase the number of premium users but divert other users to piracy. On the contrary, fewer restrictions deter online piracy. We show that with a low level of piracy, the firm sets a high level of restrictions on the free version, which makes the traditional premium business model more profitable than the freemium model. We therefore challenge the idea that strong copyright laws are necessary to protect digital markets. We argue that there are market solutions to fight free with free that better segment consumer audiences according to their willingness to pay for digital music.

Suggested Citation

  • Antoine Dubus & Christine Halmenschlager & Patrick Waelbroeck, 2023. "Fighting Free with Free: Freemium vs. Piracy," Working Papers hal-03991858, HAL.
    • Handle: RePEc:hal:wpaper:hal-03991858
    Note: View the original document on HAL open archive server: https://hal.science/hal-03991858
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    References listed on IDEAS

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    1. Bae, Sang Hoo & Choi, Jay Pil, 2006. "A model of piracy," Information Economics and Policy, Elsevier, vol. 18(3), pages 303-320, September.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Online piracy; versioning; freemium; streaming; copyright; music;
    All these keywords.

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