Industry and Data Description
Our empirical analysis focuses on digital music, which
represents one of the most important and well-known product
categories in the digital media space. The opening of Apple's
iTunes store on April 28, 2003 was a disruptive event for the music
industry and created a blue ocean (Kim and Mauborgne 2005) for
digital music. It has even been said that “iTunes killed the (old)
music industry” (Gollijan 2013). In 2004, one year after the
inception of iTunes, music industry revenues stemmed overwhelmingly
from physical (digital) products (98.5% vs. 1.5%). In
2012, digital products have overtaken physical products (40.4%
vs. 39.5%).4 Digital music is distributed via web-based stores
allowing for 24/7 availability, easy price comparisons, sampling
and immediate purchase of a very wide variety of popular and
long-tail music (Elberse 2010; Elberse and Oberholzer-Gee 2007).
As typical for industries with high price transparency, digital
media providers charge prices similar to the competition and
are limited in their power to attract competitors' customers. Our
conversations with these providers reveal a strong focus on
increasing spending among existing customers. Increasing
share of wallet can be implemented along two dimensions in
the digital media space: 1) shifting offline purchases to online
and 2) stimulating demand by offering greater variety