Studios Can Do Better in Profiting From 'Watch at Home' Viewers

June, 04, 2010 2:26 pm | On #Video on Demand

The tried and true “release windowing” strategy of theaters then paid cable television then DVD then commercial television could be on its way out. Instead, studios are contemplating shaking up their pricing strategy by offering new films on home pay-per-view, 30 days after release, for $20 to $30.

This is a shrewd strategy to better capitalize on new release marketing and earn higher profit from the significant demand of consumers who want to watch movies at-home. We all can agree that consumers are willing to pay more than $1 to watch a blockbuster Hollywood movie at home. However with the current windowing strategy, rental companies such as Netflix and Redbox purchase DVDs (target priced to consumers) and earn profits by renting them. Studios can, and should, do better in profiting from “watch at home” viewers.
 
$20 to $...
Read More

Apple's iPad Can Capitalize on Fragmenting Marketplace

February, 08, 2010 3:33 pm | On #Apple, iPad, Rafi Mohammed

Newspapers, magazines, book publishers, television networks and movie studios need only examine the bumpy evolution of the music industry brought on by the iPod to see what’s potentially on the horizon for them.

Eight and a half years after the iPod’s introduction, the way people listen to music has significantly changed: Digital music revenues are expected to surpass those from CD sales.

It’s too early to know whether the iPad will incite such drastic change for the content it displays, but one thing is certain: The days of counting on big profits from hardcover books, print subscriptions, ratings-based ad revenues and opening-weekend box office are over.

While content remains highly valued, its consumption is becoming increasingly...

Read More

Plan, Pricing Flexibility Could Boost Sirius XM's Business

December, 17, 2009 11:41 am | On #Rafi Mohammed, Sirius XM Radio

It takes a significant amount of investment -- financial as well as hard work -- to bring a new product to market.

But no matter what product or service you provide, there usually is an opportunity to generate significant profit and growth by offering a new pricing plan.

Consider the opportunities available to satellite radio provider Sirius XM Radio.

A key strategy Sirius XM is pursuing to gain new subscribers is to get its radios factory-installed in as many vehicles as possible. The hope is to offer new car owners a few months of free service to hook them, and then charge a monthly fee for unlimited service.

A key barrier to converting trial users to paid subscribers is that not all drivers need an “all you can eat” pricing plan. All new car owners don’t have long commutes or make cross-country road trips. For those who spend less...

Read More

Book Publishers Face the Prisoner's Dilemma

October, 22, 2009 3:22 pm | On #Amazon, books, Wal-Mart

One of the biggest pricing dramas of 2009 is taking place as we speak -- the war between Wal-Mart and Amazon on top-selling hardcover books.

Wal-Mart launched the war last week by offering 10 highly anticipated titles (by well-known authors including John Grisham, Stephen King, Dean Koonz and Sarah Palin) for $10. After a few back-and-forth volleys, Wal-Mart is now selling the titles for $8.99 (free shipping) and Amazon has a $9 price (free shipping only if total purchases are $25 or more).

At these prices, both retailers are losing money on each sale. The traditional wholesale price of books is set at 50% of list price (regardless of what price retailers ultimately decide to charge). Thus, with a list price of $35 for King's new novel "Under the Dome," Amazon and Wal-Mart are losing in the neighborhood of $8.50 per book sold.

...

Read More

Why All the Rage at Redbox?

September, 09, 2009 6:40 pm | On #DVDs, Redbox

 

Redbox, the dollar DVD rental kiosk company, is the “rage” of both consumers and Hollywood. With cheap rentals and convenient locations, consumers are rewarding Redbox with phenomenal growth.
 
Inciting a different type of rage, with DVD sales down by 12 percent to 18 percent, many movie studios view dollar rentals as a primary culprit that is cannibalizing movie sales.
 
Redbox has an innovative business model. For a dollar a night, its vending machines rent the latest Hollywood releases, as well as an eclectic mix of past hits. With many locations (there are 10 within a five-mile radius of my home), movie-watchers can conveniently rent from one kiosk and return to another. Retailers love hosting Redbox machines as it drives traffic to their stores.
 
Many movie studios are...
Read More

Those e-Books Are Here to Stay ... Get Used to Them

July, 20, 2009 4:16 pm | On #e-books

In last week's New York Times, Motoko Rich and Brad Stone wrote that “no topic is more hotly debated at the moment than the timing, pricing and ultimate impact of e-books on the financial health of publishers and retailers.”

The primary debate centers on how low-priced ($9.99) digital books affect demand for more expensive ($25+) hardcover books. Since digital books are more profitable to publishers, my response is “who cares?”

The norm in the publishing industry is to set a wholesale price equal to 50% of the hardcover list price. A $25 list price yields a $12.50 wholesale price. Interestingly, publishers also sell e-books to retailers at the same 50% (of hardcover retail) price. Thus, when Amazon sells a popular e-book for $9.99, it is usually losing money on each sale.

E-books are more profitable than their hardcover counterparts for...

Read More

AEG Making The Very Best Out of a Bad Situation

July, 07, 2009 1:22 pm | On #aeg, Michael Jackson

With entertainer Michael Jackson’s untimely passing, many thought that it would be curtains for AEG Live, the promoter of Jackson’s impending 50 London concerts.

 

On the hook to refund $85 million to ticket buyers, the promoter had already reportedly invested $30 million into the tour for production costs.

 

And while AEG held a $17.5 million insurance policy with Lloyds of London, there seems to be a skirmish between AEG and Lloyds over whether the policy covers a drug overdose. Immediately after Jackson’s death, one concert executive commented to MSN Money, “It’s either horrible or really horrible” for AEG.

 

In response, Randy Phillips, AEG Live’s CEO, took the unusual step to declare, “For the record, this great company that I work for is not bankrupt.”

AEG...

Read More

A Proposal to Solve Concert Ticket-Pricing Woes

June, 16, 2009 11:04 am | On #Irving Azoff, Ticketmaster

At a recent D: All Things Digital Conference, Ticketmaster CEO Irving Azoff proclaimed, “We haven’t done enough dynamic pricing for tickets, and we should, and that will help make people happy.”  Mr. Azoff is right, dynamic pricing is the key to pricing for profits and growth in the rock concert industry.  

The challenges of setting concert ticket prices come down to two key issues: (1) uncertainty and (2) properly scaling the house (setting the right price for different seats).

In an industry where high financial guarantees to artists are the norm, promoters need to set the right ticket prices to survive. There may be 12,000 fans cheering for an encore, but if a promoter had bet that the attendance would be 13,000, s/he is sulking over a big loss.

 

...

Read More
Sign Up For First Take

Get Our Daily Email, and Receive Invitations to Our Screenings Series

Start your day with all of the news worth knowing

What's First Take?

Ear on the Oscars
Transformer Sound
Latest Posts

Description

Rafi Mohammed, Ph.D. is a pricing strategy consultant and author of pricing strategy books, "The Art of Pricing" (Crown Business, 2005) and the upcoming "The 1% Windfall" (HarperCollins). He wrote his economics Ph.D. dissertation (Cornell University, 1994) on rock-concert ticket pricing and bundling. For more pricing-strategy insights, check out his website.
 

Subscribe to Rafi Mohammed
Most Popular