One particular area of interest for the firm is whether changing the specific content offered in the subscription would have a material impact on a prospective customer's willingness-to-pay. To form a basis for your quantitative analysis, you recently conducted a large-scale conjoint survey to a sample of 1,000 subjects, selected to mimic your current target market of prospective customers. Currently, your firm offers a single subscription plan consisting of content from the following television channels: NBC, CBS and ESPN. However, for the purposes of the study, several other channels were also tested. Each subject was asked to rate 15 different subscription profiles. In each profile, the subject was asked to evaluate the content packages on a 1-month basis (i.e. ratings are on a per-month of service basis). In addition, the study included the specific phone (device) model since different models have different displays, making the "viewing experience" device-specific. Three specific phone models were tested: Nokia, Samsung and LG. Subjects were given live demonstrations of the service on each of the devices before completing the survey. In other words, the valuation of the "brand of the device" pertains to the valuation of monthly phone service on this specific device. Therefore, the valuations of different television content pertain to the additional benefit a subject receives from watching a specific television channel (irrespective of the device on which it is watched i.e. there is no complementarity between the specific device and the value a subject derives from watching television content). Currently, the firm only sells its subscription service for usage on the LG phone. Results from this survey have already been tabulated by your marketing research team. The market research team has already clustered the subjects from the study into distinct groups (or "segments"). To calculate the willingness to pay, the LG device was treated as the base brand and the brand valuations of Nokia and Samsung were measured relative to the LG device.

Q1 Consider the current subscription plan offered by the firm and assume it is the only service offered on the market: basic service on the LG Device with content from NBC, CBS, and ESPN. Plot the EVC demand curve for this subscription plan. Be sure to label your graph clearly.

Q2. Now suppose the firm also offers an alternative plan consisting of basic phone service on the LG device with content from NBC, CBS, ABC, ESPN and STARZ for $50 per month. Plot the new EVC demand curve for the plan offered in 1 (a).

WTP Features Segment 1 Segment 2 Segment 3 Base Device (LG) 18.27 41.23 67.52 NBC 1.82 8.28 14.13 ABC 4.41 7.93 -8.15 HBO 43.51 44.16 13.37 CNN 3.12 -0.69 11.28 CBS 2.79 14.41 21.83 ESPN 2.24 11.72 17.97 STARZ 11.45 2.70 -7.90 Nokia -6.87 -4.48 -16.92 Samsung 8.69 14.22 19.99 Segment Size 59.40% 14.20% 26.40%