Question

Netflix gets to retain the entire subscription revenue for every disc sent out to a customer.

What happens to Netflix's subscription revenue for discs sent to customers?
a. It's shared with other companies.
b. Netflix retains the entire revenue.
c. It's donated to charity.
d. It's refunded to customers.

Answer 1

Netflix retains the entire revenue option (b) from its DVD rental service subscriptions. Despite changing consumer preferences towards streaming, the company has navigated market trends successfully, as evidenced by fluctuations in subscription prices and packaging changes over time.

Step-by-step explanation:

When a customer subscribes to Netflix's DVD rental service, Netflix retains the entire subscription revenue for every disc sent out. This means that the answer to the student's question is option b, Netflix retains the entire revenue. This subscription model has been a source of profit and growth for the company over time, despite the shifting consumer preferences from physical DVDs to streaming video services.

For instance, the increase in Netflix subscribers and subsequent pricing changes reflect Netflix's adaptation to market trends and customer behavior. In 2011, confronting a need to manage costs and revenue carefully, Netflix separated its streaming and DVD rental services, leading to a significant price hike for customers who wished to retain both services.

Ultimately, the rise in the number of Netflix subscribers and the service's evolution highlights the company's ability to navigate the shifting landscape and the changing preferences for how media is consumed.