Question
Netflix subscribers, get ready to pay a little more to watch your favorite movies and TV shows. The streaming service announced Tuesday it would raise
Netflix subscribers, get ready to pay a little more to watch your favorite movies and TV shows. The streaming service announced Tuesday it would raise its prices for its 58 million subscribers in the United States, NBC News reports. All three of Netflix's plans basic, standard and premium will increase in price by $1-$2. The company's standard $11 plan will increase to $13 per month. Its $8 basic plan will soon cost $9, and its $14 premium plan will cost $16 a month.
We learned about subscription pricing in the course. If we assume a constant margin from a customer, a constant retention rate and an infinite horizon meaning (once acquired, the customer does not leave), the CLV is given by:
Netflixs variable costs are about $3.50 per account per month. With marketing spending of $5 per customer per month, their current retention is 92% per month. Assume they give first month subscription free to acquire new customers. Assume a monthly discount rate of 7%.
Assuming the increased prices do not affect the retention rate, compute the CLV of a customer for the standard plan.
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