The Effects of User Engagements for User and Company Generated Videos on Music Sales: Empirical Evidence From YouTube

With the growth of social network services, users have been able to freely create and share music in ways that were once thought unimaginable. Sharing a music video through such platforms can now be done simply by anyone with access to a computer or smart phone. Online music content can be divided into two major categories—user-generated content (UGC) and company-generated content (CGC). While previous studies on the content of online music videos have examined the impact of this content on, for example, a company's marketing effectiveness and brand image, they have given little attention to the different effects of user engagement of UGC and user engagement of CGC. This study attempts to address this lack by examining how these two kinds of user engagement differently influence user music choices. We will also examine the differing levels of impact on users across the initial, middle, and final periods after a song is released. In order to examine the different impacts of user engagement, we apply an estimation of generalized least squares (GLS) with a panel dataset of 1,035 songs found on Gaon, the official South Korean music ranking chart. We use the number of music video shares generated by users and firms as proxy variables of user engagement in UGC and CGC, respectively. We find that user engagement of UGC and CGC positively influence music sales. We also find that the effects are not static, but rather change in the initial, middle, and final periods after a song is released. In particular, this study finds that the effect of user engagement of UGC on sales is greater than the effect of user engagement of CGC in the initial period but that the effect of the latter becomes similar to that of former at the end of this period. This finding suggests that managers of digital music providers should encourage consumers to create their own content in the initial period, as potential consumers are more likely to buy songs with more UGC content and shares in the initial period.