Disk Business Streaming Business Estimated Streaming B.

Subscribers 23800000 21400000 21400000

DVDs Rented 5.6 8.4 8.4

133280000 179760000 179760000

Costs (as per 2011)

Fixed 115000000 805000000 2000000000
Variable
Round-trip Postage 0.8 0.05 0.05
Envelope and inner sleeve 0.1

Total Costs 234952000 813988000 2008988000

1048940000
 Price Demand Revenue COGS
Option:1 Disk 7.99 23800000 190162000 234952000 -44790000
Streaming 7.99 21400000 170986000 813988000 -643002000

Option 2
Bundled Price
12.99 23800000 309162000 1048940000 -739778000

Option 3
Pay/view 3.99 47600000 189924000 813988000 -624064000
7.99 23800000 190162000 234952000 -44790000
 4-Tier Pricing
Acquisition Cost Subscribers Break-even
23800000 1048940000
1 Older+ Classic DVD 7.14 9.99 50% 11900000 524470000 44.07310924
9.99 10.2075
12.99
10.71

2 Standard Streaming 12.99 22.50% 5355000 236011500 44.07310924

12.21 12.345
9.69
11.49
15.99
3 Premium/Hit movies 16.99 20% 4760000 209788000 44.07310924
15.49 16.365
16.99
14.99
17.99
4 Documentaries/Shows 22.99 7.50% 1785000 78670500 44.07310924
20.49 20.9225
29.99
32.23
19.21
Pay/View
Existing Customer 2.99
New Customer 4.99
1048940000
4.411722647

3.392849056

2.594061757

1.917055643