For the organization you have chosen, what are the customer value proposition, revenue sources, and cost drivers?
The value proposition to Netflix customers is being able to conveniently access a wide variety of movies and television shows on multiple devices at an affordable price. Subscribers have the flexibility of choosing from several different plans depending on their usage needs, and can easily upgrade or downgrade to another plan if their viewing habits change. Additionally, Netflix offers exclusive content not available anywhere else. Revenue is earned solely through customer subscriptions. Cost drivers include licensing fees to stream content, the acquisition, storage, and shipping of DVDs and Blu-Ray discs, the production of original programming, and all operating overhead.
What is the primary revenue model that the organization is applying (visit lecture notes on the five revenue models)? Propose an alternative revenue model for the organization, and what advantages this new one may have relative the existing model?
Netflix uses the subscription/membership model to generate revenue, requiring customers to pay monthly fees ranging from $7.99 to $19.99 depending on their plan. While this is the most logical revenue model, Netflix might also have success by going with a volume or unit-based approach. Under this model, consumers would pay for access to movies and TV shows on an individual basis, likely at a lower price for each (similar to iTunes). This could be attractive to customers with low viewing habits who may still want the convenience of streaming Netflix, but who do not consume enough content to justify paying the monthly fee. Conversely, an advertising-based model would not be ideal, as much of Netflix’s success is the result of their customers’ desire to view ad-free content; therefore, trying to generate additional revenue through advertising would likely dissuade consumers from subscribing (see: Hulu Plus). While the subscription...
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