Focus your Netflix case assignment on these three questions: Question 1. In the case, Netflix has...
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Focus your Netflix case assignment on these three questions: Question 1. In the case, Netflix has a DVD-only plan with 2 million subscribers (all other subscribers use streaming-only plans). At $14.99 avg per month per subscriber, the DVD-only plan generates about $30M/month, $360 million per year in revenue, which is bigger than most small companies in the United States. Most DVDs in the Netflix library are already paid for, and it's relatively cheap to run the DVD-only business (licensed-only DVDs, no original content costs). Those consumers who use the DVD-only plan are adverse to streaming and love the DVD-only plan, as it's about the only service remaining to rent DVDs. Should Netflix raise the price of the monthly DVD-only subscription by $1 per month, $2 per month, $5 per month or close down the DVD-only business and sell off the DVD inventory? Explain your answer. Question 2. Apple TV+ streaming launched Q4 2019 with a low subscription rate of $4.99/month. Apple has gained over 33 million subscribers in just 12 months since launch. Apple+ is considering two choices to compete with Netflix: 1) continue to hold it's very low $4.99 Apple TV+ price for at least one more year, but hold spending on new original content at current levels, OR 2) Raise the monthly subscription by $2 per month to $6.99/month, still much lower than Netflix. The $2/month will generate at least $66 million per month more profit (33M subscribers x $2 month) to invest in more Apple TV+ original content which could attract more users. Between these two choices, what do you think Apple+ should do? Explain your answer. Question 3. Netflix announced an October 2020 price increase: Basic plan $8.99 (1 screen SD), no price change; Standard plan (2 Screens HD) at $13.99, up from $12.99; Premium plan (4 Screens HD) at $17.99, up from $15.99. Although Netflix just raised prices in Oct 2020, they are considering a a $1 per month price increase across all three subscription plans in July 2021 (9 months from now). This increased revenue will allow them more revenue to build additional original content to distance themselves from Apple TV+, Disney+, Hulu and others. Netflix leaders believe their pricing is relatively inelastic, because when they've taken 10% + price increases in the past, the cancellation rate was only 3 to 4%. MONDAY ACTION: Reed Hastings, Netflix CEO, wants to get the team together on Monday to review the July pricing. Do you support or not support the action to raise subscription plans by $1 each in July 2021? Explain your answer. Focus your Netflix case assignment on these three questions: Question 1. In the case, Netflix has a DVD-only plan with 2 million subscribers (all other subscribers use streaming-only plans). At $14.99 avg per month per subscriber, the DVD-only plan generates about $30M/month, $360 million per year in revenue, which is bigger than most small companies in the United States. Most DVDs in the Netflix library are already paid for, and it's relatively cheap to run the DVD-only business (licensed-only DVDs, no original content costs). Those consumers who use the DVD-only plan are adverse to streaming and love the DVD-only plan, as it's about the only service remaining to rent DVDs. Should Netflix raise the price of the monthly DVD-only subscription by $1 per month, $2 per month, $5 per month or close down the DVD-only business and sell off the DVD inventory? Explain your answer. Question 2. Apple TV+ streaming launched Q4 2019 with a low subscription rate of $4.99/month. Apple has gained over 33 million subscribers in just 12 months since launch. Apple+ is considering two choices to compete with Netflix: 1) continue to hold it's very low $4.99 Apple TV+ price for at least one more year, but hold spending on new original content at current levels, OR 2) Raise the monthly subscription by $2 per month to $6.99/month, still much lower than Netflix. The $2/month will generate at least $66 million per month more profit (33M subscribers x $2 month) to invest in more Apple TV+ original content which could attract more users. Between these two choices, what do you think Apple+ should do? Explain your answer. Question 3. Netflix announced an October 2020 price increase: Basic plan $8.99 (1 screen SD), no price change; Standard plan (2 Screens HD) at $13.99, up from $12.99; Premium plan (4 Screens HD) at $17.99, up from $15.99. Although Netflix just raised prices in Oct 2020, they are considering a a $1 per month price increase across all three subscription plans in July 2021 (9 months from now). This increased revenue will allow them more revenue to build additional original content to distance themselves from Apple TV+, Disney+, Hulu and others. Netflix leaders believe their pricing is relatively inelastic, because when they've taken 10% + price increases in the past, the cancellation rate was only 3 to 4%. MONDAY ACTION: Reed Hastings, Netflix CEO, wants to get the team together on Monday to review the July pricing. Do you support or not support the action to raise subscription plans by $1 each in July 2021? Explain your answer.
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Related Book For
Intermediate Accounting
ISBN: 978-0077400163
6th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson
Posted Date:
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