Public libraries outperformed video rental businesses economics/market data/movies/professional

by Douglas Galbi on August 19th 2007

From 1985 to 2004, video rentals from U.S. public libraries grew 340%. Over the same period, video rentals from U.S. commercial rental businesses grew 140%. Public libraries’ video rental activity did grow from a smaller base: 70 million videos loaned in 1985 (6% of the number of videos commercial outfits turned in that year), to 300 million videos loaned in 2004 (12% of the number of videos rented commercially). The growth of video lending from public libraries has been amazing, and largely unnoticed.

Pricing is probably a large part of the explanation for this performance differential. The average price for commercially renting a video in 1985 was $2.38. The average price for borrowing a video from a public library in 1987 was $0.39 (30.4% of libraries charged for borrowing video, and those libraries charged an average of $1.29). In 2004, the average price for commercially renting a video was $3.43. The average price for borrowing a video from a library was then approximately zero. Lower price induces greater demand, and free (zero price) is a highly appealing price.

This video example does not depend on some of the factors thought to be producing the death of paid text content. From 1985 to 2004, there wasn’t a proliferation of free video content on the web. I would guess that, overall, commercial video rental stores have a video inventory that most persons would value more highly than the video inventory of a library. Consumer may like free content. But video is quite expensive to consume. Given that the average video takes perhaps an hour and a half to watch, the higher inventory value of commercial video rental firms might have easily outweighed the lower video rental price from libraries. But it didn’t.

Persons seem to have a high time-discount rate in content choices. The benefit of watching a relatively good video comes later than the cost of paying the rental fee. A high discount rate lowers the importance of the former, and raises the importance of the later. So perhaps a significant part of the challenge of making a paid content model work is delivering benefits soon relative to payments.

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The table below summarizes the facts. Subsequent notes describe the sources and estimates.

U.S. Public Libraries and Video Stores
1985 2004 % inc.
total public library circulation 1150 2010 75%
video share of library circulation 6% 15%
video borrowing price from libraries $0.50 0
videos borrowed from libraries 69 302 337%
video rental price from video stores $2.38 $3.43
videos rented from video stores 1100 2592 136%
All counts in millions. Video includes Betamax, VHS, and DVDs.

Sources

Public library circulation: For 1985, interpolated from figures for 1983 (Goldhor (1995)) and 1990 (NCES/ALA). The Goldhor figures are given in Galbi (2007a). For 2004, figure from NCES.

Video share of public library circulation: Dewing (1988) presents results from a survey in early 1987 of about 3000 public libraries having video cassette collections. The survey received 841 valid responses. Id. p. 69, Table 6.19, gives average tapes loaned, by size of the community the public library served. The survey did not include data on total library circulation. Using NCES Public Library Statistics for 1987, I calculated average circulation per week for the four community size categories used in reporting the video survey results (less than 20,000; 20,001 to 50,000; 50,001 to 100,000; greater than 100,000). Average videos loaned were 18%, 7.5%, 7.7%, and 7.4% of average library circulation for the four community size categories, respectively. Responses in the smallest community size category may not have been representative of all small libraries in that category. Since the video survey addressed only public libraries having a video collection, the survey doesn’t account for the zero circulation share in libraries that didn’t have a video collection. For a conservative estimate of the growth rate, I estimate the 1985 video circulation share to be 6%. One small additional piece of evidence: In West Virginia about 1984, the Morgantown Public Library reported that video circulation accounted for more than 6% of annual circulation. See Caron (1984). The video share estimate for 2004 is based on the data in Galbi (2007b). While the data could support a higher estimate for the video share in 2004, I’ve used a rather low estimate to generate a conservative estimate of the growth rate.

Videos borrowed from public libraries: Calculated from library circulation and video share.

Video borrowing price from libraries: Dewing (1988) pp. 70-71 provides the data on prices for borrowing videos from libraries in 1987. Most libraries (73%) had a loan period of about a week. I roughly estimate the price in 1985 to be $0.50, and also roughly estimate the price in 2004 to be 0. The later estimate is based on the declining purchase price of videos and personal knowledge of library operations. Elgin (1992), p. 12, recorded that libraries that eliminated charges for borrowing videos experienced increased video borrowing.

Video rentals from video stores: From EMA, A History of Home Video and Video Game Retailing.

Video rental prices: EMA gives the 1985 average price. I calculated the 2004 average price from rental units and total rental revenue (Adams Media Research data).

References

American Library Association [ALA], Public Libraries in the United States Statistical trends, 1990-2003.

Caron, Barbara (Fall 1984), “Video Cassettes in the Public Library,” West Virginia Public Libraries; cited in Elgin (1992) p. 6.

Dewing, Martha, ed. (1988), Home Video in Libraries (Boston, Mass.: Knowledge Industry Publications).

Elgin, Romona R. (1992), Comparison of Book and Video Circulation in Public Libraries, Student Report, Northern Illinois University, Department of Library and Information Studies.

Galbi, Douglas (2007a), Book Circulation Per U.S. Public Library User Since 1856, available at galbithink.org

Galbi, Douglas (2007b), “library users like audiovisuals,” available on purplemotes.net.

Goldhor, Herbert (1985). A Summary and Review of the Indexes of American Public Library Statistics: 1939-1983. Library Research Center Report (Eric Document # ED264879). Urbana, IL, Illinois University.

National Center for Education Statistics [NCES], Public Libraries.

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