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Video Rate Increase

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William Plank

I am working on a project that will capture the impact of video rate increases. In a selection of years the cost of video increases for the provider and in turn the cost to consumers increases. What we are looking to answer is what is the effect on the economy due to these rate increases. I have annual subscriber counts (used to eliminate new customers who enter at the new price) and the cost of service. I have built a base analysis that is a look at median income level for our area, showing a decrease in HH income across all customer that experienced the price increase and a impact event that shows increased/decreased revenues from the price change - this is my attempt to capture the net effect.

Is this the correct approach to rate change analysis?

Are there any studies that examine a similar topic? 

 

Thanks

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    Candi Clouse, PhD

    Hello there!

    This is really a hard one to tackle as the substitution effect is a major concern here. If the subscriber price for one service increases, there are many ways one might move forward. People might cancel this subscription, they might cancel another subscription, they might spend less on other entertainment options like the movies or going out to eat, and many could just pull from savings.

    Looking at a decrease in overall HH spending would imply that if the subscription price goes up, one would spend less money across all normal HH spending including rent, water, electricity, etc. which I doubt is the case. You might consider just analyzing losses to entertainment industries (movies, bowling, etc.).

    I am not familiar with any similar studies on this but it is an interesting topic!

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    William Plank

    Thanks for the quick response. I had not thought of looking at the substitution effect on the entertainment industry. I believe that is a good course of action.

    I am able to make direct connections to churn so that will solve some of the issues with the analysis. 

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    Candi Clouse, PhD

    Sounds good! Best of luck!

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    William Plank

    Would this be best conducted as an industry output event?

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    Candi Clouse, PhD

    If you are looking at changes to individual industries, then yes, an Industry Output event would be most appropriate.

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