Digital Goods Valued Less Than Their Physical Counterparts: Factor to Digital Piracy

[Len]

New research shows how much consumers value digital vs physical media.

Remember when photos had to be developed, books were exclusively printed on paper, and getting ready for a home movie night involved a trip to your local Blockbuster? If you’re my age, you would. But the warm fuzzy feelings evoked by old school physical media may easily be outweighed by an appreciation of the convenience that digital technologies have brought to your life.

As a psychologist and consumer of digital goods, I’ve often wondered about people’s sense of ownership in this new age of intangibility. For example, do people value streamed music as much as they value digital tracks on their hard drive? How about CDs?

New research by Ozgun Atasoy and Carey Morewedge in the Journal of Consumer Research (mainly distributed digitally these days) suggests that people financially value physical goods more than their digital equivalents and shows some of the psychological factors behind this link.

Granted, given the rapid transformations that have already occurred as a result of the digital revolution in consumer media and the internet, this research appears to come a bit late. But it does provide some interesting insights.

In one study reported in the article, tourists who were asked to pay whatever they wanted for a souvenir photograph on average paid three times as much for a physical copy of the photo ($3) than a digital copy ($1). In another study, participants were willing to pay significantly more for the physical format of a book ($9.59 on average) than the digital format ($6.94), and more for a movie on DVD ($8.98) than the same movie on iTunes ($5.07).

To explain findings like these, the researchers demonstrate that physical formats lead to a stronger sense of psychological ownership, which in turn contributes to higher valuations. However, the difference in valuation between physical and digital formats depends on other factors. The gap is smaller if:
 

• The good is rented or subscribed to (rather than owned). Lower permanence means less psychological ownership.
• The good is not as relevant to the consumer’s identity. One of the reported studies showed that people who had higher identification with Star Wars also had a higher purchase intention for a physical than digital copy of the movie.
• The good is owned by people with a low ‘need for control’. Interacting with physical objects establishes perceived control, which increases psychological ownership. People vary in their degree of need for control and thus their valuation of physical vs digital goods.

The last point carries implications for producers of digital goods. If people value things more if they have greater control over them, companies should offer greater control, for example by adding customization features to their products.

Atasoy and Morewedge also reckon that their results more generally may help explain why people tend to view stealing physical goods to be morally wrong, but consider digital piracy to be more acceptable.

Another important finding by the authors relates to consumption utility – a fancy term for enjoyment. Participants in their research did not give a higher enjoyment rating to books or movies in a physical format than a digital format. Hence, since format does not make a difference to their experience, consumers may undervalue experiential goods in a digital format simply because they are intangible.

The studies reported in the article did not include music, which may be a special case when it comes to digital media. As I was about to publish this post, I came across an interesting statement given by a music industry expert who raised the question whether money is still a meaningful measure of music's value in the 21st century. At a time in which music is increasingly about experiences, he argued, we should no longer ask how much people are willing to pay; we should instead ask how much of their time people are willing to give. This question maybe one for future research.