Question

When Disney Studios develops a forecast for home video units, it uses the most recent regression model, which contains one year’s worth of data, as a starting point. Why do you think it uses only one year’s worth of data in the model instead of using data for all films and for all available years? Please provide as many reasons as you can.

Answer 1

Forecasting with limited data is done in many situation like data is not available for long term past, data collection is very costly, the subject of the forecast is very dynamic etc,

In Disney's case theses can be few causes to use short term data:

• Technology is always developing and old things are getting redundant, so we cannot use data for many years from the past
• With lot of new players or competitors in the market, using past data for long period can give fase results as you won't get data for the new buisness in the past data
• With the boom of internet usage and avialability of materials online if you look at data for many years in the past you will get wrong results
• Due to this industry being very dynamic, the needs of consumers have also grown a lot and they have become more demanding. So long term past data won't give you correct insights