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CASE STUDY OF TIME WARNER (LOCATED NEAR END OF TEXT BOOK)
Pages 1 (251 words)
The case involves a simple question of whether lowering the price of subscription, as a promotional campaign would boost or would further dampen the revenue. Currently, the company receives monthly revenue of $ 8946 per month, a very small amount compared to its subscription revenue of $ 20, 448,000 for the year…
Upon looking at the tables given, demand is apparently elastic, with a lot of competitor networks around. One thing that makes a demand elastic is the presence of many substitutes, meaning competitors which can be easily availed by the potential customers. Network competitors include ABC, ESPN and Disney from Disney Company; CBS, MTV and UPN from Viacom and Fox from News Corp.
Given that the promotional decline in price is only given to STARZ's current and future subscribers, and would not affect its big network businesses such as HBO and Showtime, it will be worthwhile to lower the price for the purpose of attracting subscribers. The decline in revenue from existing subscribers is deemed smaller than the potential revenue, given the larger market that it has to cater. Also, the popularity of STARZ, as it would be well advertised given the promotion is also worth the price. Since the current revenue of STARZ is just .5% of the total revenue from subscription (excluding advertisements and content), meaning there are a lot of room to grow in the current market, revenue can double or triple with the promotions.
The revenue growth rate figure for News Corp's Fox News is really admirable, standing at 67.8%, compared to last year. This is superior to CNN's 12.5%. ...
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