Here are some recent news stories showing the power of pricing (or lack thereof...think
Elasticity) and the corresponding consumer response. First up, you may have heard how
Netflix (Wikipedia) tried to
spin off its DVD mailing company as Qwikster (by Benny Envangelista in San Francisco) and raise prices at the same time. Consumers backlashed. Many thousands canceled their subscriptions. A good percentage of those customers switched to the non-subscription service,
Redbox (Wikipedia). Redbox is the largest renter of DVD's in the USA. In 2008 they reached 100 million rentals. In 2010 they reached
one billion!
Now, Redbox has raised prices too (
news story from Marketplace.org). How do you think consumers will respond? What other options do they have, legally (i.e. not downloading torrents/P2P), Amazon, iTunes, Zune/Xbox, cable TV, Satellite (Dish network), SwissCom, T-Com, StarHub or SingTel?
Consider which factors increase the price elasticity of Netflix while at the same time decreasing the price elasticity of Redbox making it more price inelastic allowing the company to successfully raise prices.
How is Redbox, Netflix, and the NBA related? (click read more below)
Now, Redbox has raised prices too (news story from Marketplace.org). How do you think consumers will respond? What other options do they have, legally (i.e. not downloading torrents/P2P), Amazon, iTunes, Zune/Xbox, cable TV, Satellite (Dish network), SwissCom, T-Com, StarHub or SingTel?