From free to fee

: the causal effect of free trials on online video game sales

Abstract

A wide range of companies in the digital industry, Netflix and Spotify among others, apply free trials for customer acquisition. There exists abundant research on the economic effectiveness of free trials for analog products and services. However, for digital products and services this topic has not sufficiently been researched. Using real-world observational data from the digital video game distribution company Steam, this study scrutinizes the causal effect of the company’s free trial scheme “Free Weekend” on customer purchases and streaming viewership. Further, factors moderating the effect of free trials on customer purchases are analyzed. Fixed effects regression models are employed to identify the proposed causal effects. This study finds that the presence of a free trial increases customer purchases in the subsequent week by 10.8% (p < .10). This effect disappears after the week subsequent to the free trial. None of the proposed factors moderating this relationship, game price and rating, are significant. Further, this study finds that the presence of a free trial increases the streaming viewership of a game on the streaming platform “Twitch” by 150.4% (p < .01) during the free trial and by 82.0% (p < .05) in the subsequent week. Again, this effect disappears after the week subsequent to the free trial. A conducted robustness check indicates limited robustness of the results obtained from the main fixed effects analysis of this study. This study underlines the importance of revalidating scientific findings and customary marketing knowledge stemming from past analog environments for digital products and services.

Date of Award	3 Jul 2019
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Filipa Reis (Supervisor)