Modeling Multichannel Home Video Demand in the U.S. Motion Picture Industry

Abstract

The U.S. motion picture industry has become increasingly reliant on posttheatrical channel profits. Two often-cited drivers of these profits are cross-channel substitution among posttheatrical channels and seasonality in consumer preferences for any movie. The authors use a differentiated products version of the multiplicative competitive interaction model to investigate these two phenomena. They estimate the model using data from 2000 and 2001 on two posttheatrical channels in the U.S. market: purchase and rental home viewing channels. Contrary to expectations based on business press commentary, after controlling for seasonality and movie attributes, the authors find low cross-channel price and availability elasticity for both channels. To measure the extent of cross-channel cannibalization, they simulate a 28-day window of sequential release with either purchase or rental channel going first. They find that windowing reduces the sum of revenues across both channels, because more consumers choose to not purchase or rent when faced with older movies in their favored channel rather than to switch to the alternative channel with newer movies.

Experimental evidence on demand for “on-demand” entertainment

“…For example, Lang, Switzer and Swartz (2011) find evidence of relatively price inelastic demand for home movie consumption via DVD, while De Roos and McKenzie (2014) find evidence of relatively high price elasticity of demand at the cinema box office. Even among segments of consumers, Mukherjee and Kadiyali (2011) find evidence that those with stronger preferences for movies with higher theatrical revenues and advertising expenditures tend to be less price sensitive than average. Given varying evidence on the price elasticity of demand in this context, relatively simple strategies of price discrimination such as bundling and two-part tariffs have been advocated in the literature (Shiller and Waldfogel, 2011;.…”

An Empirical Study of Uniform and Differential Pricing in the Movie Theatrical Market

“…20The overidentification test for the IVs yields a p -value that is greater than .99, indicating that the data do not have strong evidence that the IVs are not valid. To test whether our main finding is robust to the IVs for the nesting parameters and the specific parameterization of the nested PD model, we estimate several simplified models without using those IVs, following Mukherjee and Kadiyali (2011). The results appear in the Web Appendix, and our main finding holds.…”

Investigating the joint choice behavior of intercity transport mode and high‐speed rail cabin with a strategy map

“…Furthermore, the proposed NL model investigates the systematic heterogeneity by specifying the socioeconomic variables in the utility function. Further study could specify the explanatory variables as a random coefficient to catch the random heterogeneity for an NL model or measure the traveler's attitudes toward service quality to account for the latent effect of mode choice behavior .…”