How Video Rental Patterns Change as Consumers Move Online
University of Texas at Dallas - Naveen Jindal School of Management
Michael D. Smith
Carnegie Mellon University - H. John Heinz III School of Public Policy and Management
University of Texas at Dallas
October 10, 2012
How will consumption patterns change when consumers move from brick-and-mortar to Internet markets? If consumers purchase more niche products online than at brick-and- mortar stores, does this have something to do with the channel or is this solely due to selection effects: the types of consumers who decide to use the Internet channel or the types of products that consumers select to purchase online?
We address these questions using customer-level rental panel data obtained from a national video chain as it was closing many of its local stores. This allows us to observe how behavior changes when consumers are forced to move from brick-and-mortar to online consumption.
Our results suggest that when consumers move from brick-and-mortar to online channels they are significantly more likely to rent “niche” titles relative to “blockbusters.” This suggests that a significant amount of niche product consumption online is due to the nature of the channel, not just due to selection effects.
Number of Pages in PDF File: 34
Keywords: Long Tail, movie rentals, natural experiment, empirical estimation
Date posted: January 23, 2012 ; Last revised: August 20, 2014