Is Video on Demand Cannibalizing the Video/DVD Rental Market?
” Amy Liu, Geodemographer, Marketing Systems Group, Kevin J. Babyak, Statistician, Marketing Systems Group, Paul Rappoport – Professor, Department of Economics, Temple University The hypothesis, from some financial analysts, is that the large players in the storefront video rental market, firms that include Blockbuster, Hollywood Video and Movie Gallery, Inc., will see a declining demand for DVD rentals as Video-on-Demand (VOD) becomes more available to households. The rise of such new technologies as VOD will lead to the cannibalization of video store rentals. In this paper we construct a formal model of DVD rental demand and use that model to test this hypothesis. We use household level data from the Centris National Omnibus Survey along with data on the location of video stores to estimate a log-linear demand model of DVD rental. After controlling for such demographic factors as age of head of household, household income, presence of children and population density, preliminary mode
