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DVD rental stores & history.

DVD rental stores have been buffeted by competition and technological change in a way that is fascinating to students of business history. A fun thing to consider too because simple perceptions here drive justifiable economic knowledge and insight.

I once had 4 of DVD rental stores within 2 km of my home. Now there are none – the last closed  a few weeks ago.  I recall the original movie rental stores stores that rented out VHS and Betamax video cassettes and the eventual disappearance of the technologically superior Betamax cassettes.  It was during this period that I bought a few Laser Disks with my favourite opera on them – it must have been 20 years ago. There were even a few specialised laser disk stores around Melbourne.  The arrival of DVDs killed off video cassettes and laser disks and competition between the stores eroded profits until only a few surviver stores remained in accord with economic theories of monopolistic competition.  Now online streaming, cheap legal DVDs under, I suspect, pressure from the illegal DVD trade, have finished off most of those.  Both online streaming servives and online vendors of new DVDs have search facilities that are far superior too than those available in the physical rental stores. In the end, too, rental DVDs were often scratched so if you wanted to watch a complete unblemished version of a movie you bought it (the advent of illegal copying and competition have driven down the price of new DVDs close to their marginal production plus distribution cost) or downloaded it from a streaming service.

Few DVD rental stores remain these days  and they have switched to specialised operations of the type described in this BBC report.

The DVD rental business is going the way of the CD music business and, to a less extent, book retailers.  Book retailers probably have a brighter future because people do like to browse through boos in a store but, even here, I suspect many browse then buy online at cheaper prices.  It is individually rational behaviour that in fact creates social costs.

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