Premium Bundle for Profits

We currently offer three different subscription plans to our 60 million US streaming customers: $9 Basic (1-screen, standard resolution), $13 Standard (2-screens, HD resolution), and $16 Premium (4-screens, HD+Ultra resolution). As other streaming content providers are starting to pick away our basic and standard subscribers, we are thinking of just offering our premium plan and I would like you to review our options if we go in that route.

Our customer experience team has reviewed our subscriber demographics and we think we have three different types of consumers: movie buffs that really enjoy our highest resolution quality, students that really enjoy our multiple screens (the more the better), and families with 2+kids that really enjoy both features. In fact our experience team has run some surveys and concluded the following willingness to pay of each service feature within each demographic.

Consumer Type 4-Screens HD+Ultra

Movie Buffs $7 $13

Students $12 $5

Families $8 $8

Please note that within our 60 million US streaming consumers, 15 million are movie buffs, 15 million are students, and 30 million are families.

Given the above willingness to pay for each service feature, I want you to review our pricing strategy under the assumption that we will only be offering these two premium features (4-screens and HD+Ultra resolution).

Please let me know the optimal a la carte prices for each feature, as well as what the optimal bundle price would be for maximizing profits. I think there is room to increase price of the premium bundle, given the high valuation that movie buffs have for HD+Ultra, and the high valuation that students have for 4-screens. Let me know if your analysis reveals the same.

In your analysis, do not worry about costs, rather treat maximized revenue as maximizing profits as the two features do not differ in costs of delivery.