As you are aware, we recently added the EPIX Movie Channels as part of a new tier of programming for our digital video subscribers. The EPIX channels are sold as add-on package for $9.75 per month, but we would like to potentially increase our contribution margin from our subscriber base. Currently we have 15,059 subscribers, generating monthly revenue of $146,823.

In an earlier study, our marketing department generated data on sales quantities at various price levels. In addition, we have included the licensing cost as well as regional expenses.

Please provide a recommendation of the profit-maximizing price, and how much our profits will increase if we adjust price to the recommended level. Also, please note whether this will impact our revenue.

A B C D E F G H Divisional Sales, Number of Cost of License General and Price Subscribers Fees Administrative (Thousands) (Thousands) Costs Thousands) $5.00 29.974 $ 134 883 $ 14.50 $5.50 29.256 131.651 14.50 $6.00 17.822 80. 199 14.50 $6.50 22.657 101.956 $ 14.50 $7.00 19.897 4 89.537 14.50 $7.50 16.671 $ 75.017 14.50 $8.00 20.492 $ 92.2139 14.50 $8.50 20.000 $ 89.998 14.50 10 $9.00 19.760 $ 88.920 14.50 11 $9.50 17.123 $ 77.053 14.50 12 $10.00 12.644 56.896 14.50 13 $10.50 12.785 $ 57.531 14.50 14 $11.00 12.216 54.974 14.50 15 $11.50 13 246 $ 59.608 14.50 16 $12.00 8.637 38.867 14.50 17 $12 50 10.595 47.678 14.50 18 $13.00 5.857 $ 26.357 14.50 19 $13.50 2.615 $ 11.768 $ 14.50 20 $14.00 2.739 $ 12.326 14.50 21 $14.50 5.291 $ 23.809 14.50 22 $15.00 3.051 $ 13.730 $ 14.50 23 24 25 26 27 28 29 30 Estimates of market penetration in the Tri-State Region based on 31 different price levels. 32 33 License fees represent the fees that we must pay to Epix for the 34 rights to re-transmit their channels. Fees are based on the 35 number of subscribers. 36 37