Buying Opposed to Renting Economics for Business I/ Econ 360 Dr Pamela Cameron

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Buying Opposed to Renting

With the introduction of the digital video decoder (DVD) to the market, the videocassette recorder (VCR) is becoming obsolete. More and more single-family homes are opting for the digital dolby discs rather than the traditional videocassettes. With video renting becoming a more popular source of entertainment, the DVD rental industry saw a dramatic increase in revenue. The new DVD players that are being released to the market are more high-tech and advanced, and are equipped with more features, for this reason they are in higher demand. "Singles who range in ages between 20-34 and make an average of $20,000 to $60,000 annually" (Hernandez, 2004) is the market that the movie studios are targeting. With the increase in sales of the newer machines, consumers prefer to build their home video collection, as opposed to renting videos. This has been the case as of the last two years.

The video rental industry has seen a decline of at least 16.5 percent since the beginning of the first quarter of 2004, and as the DVD machines become more popular more households will more than likely obtain one.

"More than 97 million DVD players have been sold in the United States". (Hernandez, 2004) This market is on an incline and with the numbers steadily increasing, more and more homes are opting to build their DVD movie collection rather than renting the discs. Stores are capitalizing on the consumer's decision. The rental retail giant Blockbuster Video has chosen to cater to this market by discounting their movies and make them available for sale by offering excellent deals and generous discounts. A new marketing ploy has been adapted that enables consumers to trade in their old movies and buy a new release at an even larger discounted rate. Blockbuster is not the...