ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

The Price Elasticity of Netflix

Updated on January 27, 2012

Hubpages

Who Will Remain a Member of Netflix?


The number 1 fear of Netflix’s CEO is that the change from a combination of selling unlimited DVD and unlimited Streaming caused him to believe that the company would not have great success in business as they have had for the past 5 years if they separated the two. By letting his arrogance get in the way, played a big part of the miscommunication that came about when the members of Netflix found out that the programs were going to be separated and possibly have a price increase.

Netflix’s price increase has just previously gone up by 60% after the streaming and dvd rental programs were combined. The number of subscribers in their 3rd quarter was 23.79 million. The company has generated over $822 million dollars in revenue and that is just from one quarter. If you look at their 2nd quarter they had received 24.59 million subscribers. Overall Netflix has lost over 800,000 subscribers because of their price hikes. The cost of unlimited streaming and unlimited dvd rentals is at a set price of $7.99 each. The company concurs that the price at hand still is relatively low compared to their competitors.

The price elasticity demand was lowered not only because there was a separation of the products that the consumer was use to, but also because the pricing going up. In today’s economy people are basically trying to see where every penny is accounted for. There is also a separation with the cable bills. People are now trading there cable box for a product called Hulu.com. It is an internet site where you can watch unlimited television, movies, and recorded shows at your leisure.

Because of the price elasticity of Netflix went 60%, customers were very furious to learn of a new company called Qwikster in the recent chain of events. They did not want to have to pay for two hiked up prices for a product that they were used to using, that now is combined. A lot of times companies will higher there prices to cover the expenses that may be at hand when they choose to expand a service or product. Consumers are really reluctant to dish out more cash. If you think about Netflix, it is not a necessity. No one is going to die without it. So with me being a consumer, I try to hold on to things that are necessary by paying for those items first and if I had a little extra money left over,then I could splurge on something that I want as opposed to something that I need.

On television these days, speaking personally I may see an infomercial at night with this great product and if I have the money on my debit card I purchase it. Then, when Fed Ex delivers it to my door I get all excited, until I open the box and realize that it is not what I expected. The infomercial made it seem so much better. Sometimes if a company wants their product or products to sale, they will advertise to consumers in a way to lure them in. A lot of times companies will you testimonies from people claiming how great the company’s products or services are. In all actuality, the people claiming how wonderful the product or service is, are just basically actors being paid to say so.

As far as the Cross-Price Elasticity for Netflix vs. Redbox is that Netflix earnings were 1.36 billion dollars in 2008, while Redbox only earned 388.5 million dollars in 2008. Both company’s revenue was hire in 2009. Netflix earned 1.67 billion in 2009, while Redbox’s revenue was only 773.5 million that same year.

I believe that both companies are unrelated because as we’ve notice, the companies’ sales have increased in the past five years and although it is relevant and clearly noted that Netflix has brought in more revenue compared to the Redbox, but it is also relevant that we as consumers are seeing Redbox as a growing business. Redbox is going to team up with Verizon. Their revenue will continue to grow and their market will expand.

Comments

    0 of 8192 characters used
    Post Comment

    No comments yet.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)