Ways to watch movies - cross elasticity of demand in action!

The Times reports today that UK online retail giant Amazon is poised to contest the market for those who want to watch films over their web connections. Amazon is set to launch a movie streaming service perhaps linking it to the existing Amazon Prime where members get free shipping if they pay an annual fee.

Bundling film streaming in for free (to start with) with Prime subscriptions makes a certain commercial sense - after all well established Amazon Prime users spend much more per person on purchases on Amazon.com than do non-Prime users. 13% of Amazon’s 130 million active users are Prime members.

We cannot link to the Times article because of their pay wall but it provides a good example of cross price elasticity of demand in action by reminding us of the different ways that people can choose to watch movies and how advances in web technology is creating more choice.

For those who want to watch a movie after it has disappeared from the screens of the cinema chains here are the main options:

1/ Buying the DVD from an online retailer (Play.com) or a bricks and mortar retailer (HMV)

2/ Renting it from a business such as Blockbuster

3/ Having it posted to you from a supplier such as LoveFilm (now owned by Amazon)

4/ Purchasing and downloading using iTunes

5/ Streaming the movie using a web service such as NetFlix

The final choice depends heavily on personal preferences and the hardware and speed of connection you have available. I am still at the traditional end of the market and take great pleasure from adding to my DVD box collections in the study! But I sense for many the flexibility of streaming films through their laptops or TVs will become increasingly popular.