1 / 13

DVD Pricing

DVD Pricing. January 24, 2002 Amy Dix Jay Gorman Hap Phillips Scott Tower. Video Pricing – Level Set. Goals for discussion Understand pricing dynamic for both VHS and DVD Maximize profit for movie studios Implement two part pricing strategy for DVD’s. Windows of Exhibition. Theaters.

yardley
Download Presentation

DVD Pricing

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. DVD Pricing January 24, 2002 Amy Dix Jay Gorman Hap Phillips Scott Tower

  2. Video Pricing – Level Set Goals for discussion • Understand pricing dynamic for both VHS and DVD • Maximize profit for movie studios • Implement two part pricing strategy for DVD’s

  3. Windows of Exhibition Theaters Video/ DVD Pay-per- View Premium Cable TV Network Cable TV Syndicated TV

  4. Revenue Generate from Hollywood Films Video/DVD Rentals vs. Sales • $4 Rental - $1.60 revenue • $10-$15 retail sale revenue TV 28% Video/DVD 46% Box Office 26% Source: "Filmspace: Behind the Scenes," ABN Amro, Sept. 12, 2000

  5. Video Pricing – VHS • Discriminate between individual consumers and rental retailers • Goal of profit maximization • Creates artificial window of opportunity for rental

  6. Video Pricing – DVD • Charge one price • New technology • Limited title selection • Goal was for DVD to gain acceptance • Attain critical mass • Estimated 25% of VHS households now own DVD players • Projected to reach 50% within 2 years

  7. Consumer Landscape – DVD Owners Then, DVD consumers were… • Movie enthusiasts • Apt to buy movies for repeat viewing • Tech savvy • Wealthy – could afford $500 DVD player Today, DVD consumers are… • Varied – not a “typical” DVD viewer Pricing strategy must be modified to meet the changing consumer preferences

  8. Buy v. Rent Consumers will buy a DVD when… • High ticket sales • Receives critical acclaim (Oscar winners) • Children’s movie (Disney) • Collectibles (Godfather, Star Wars, etc.)

  9. Buy v. Rent Consumers will rent a DVD when… • “Not a blockbuster” • Weekend an Bernie’s II • Kazaam • Gleaming the Cube • Breakin’ 2

  10. New DVD Pricing Strategy – Part 1 For DVD’s that consumers will rent… • Mirror current pricing strategy for VHS • Price discrimination window should last four weeks • Maximize profits from rental retailers

  11. New DVD Pricing Strategy – Part 2 For DVD’s that consumers will buy… • Implement single price strategy immediately upon release • Charge $10-15 per DVD • Capitalize on strength of one marketing campaign alerting public and rental stores that movie is available

  12. Conclusion High penetration of DVD players means that market can support a change in pricing • Adopt a two part pricing strategy • Low price for movies with high potential for ownership • High price for movies with low potential for ownership • Maximize profits for studios

  13. Questions?

More Related