Question

Choose the correct answer: Why is the "First-Sale Doctrine," including understanding when it does and doesn't apply, relevant to Netflix?

a. It means content acquisition costs for DVDs are more predictable than streaming costs.
b. It means that content acquisition costs for streaming are more predictable than DVDs.
c. In cases of streaming media, it facilitates a shift of bargaining power to content suppliers.
d. In cases of streaming media, it facilitates a shift of bargaining power to firms paying to license content from suppliers.
e. None of the above.
f. a & d
g. b & c
h. a & c
i. b & d

Answer 1

The First-Sale Doctrine is relevant to Netflix because it makes content acquisition costs for DVDs more predictable than streaming costs, and it results in a shift of bargaining power to content suppliers for streaming media.

Step-by-step explanation:

The correct answer is f. a & d. This is because the First-Sale Doctrine allows Netflix to predict costs more easily for DVDs as once they purchase a copy, they can rent it out as many times as they like without incurring additional fees. However, with streaming content, the bargaining power shifts to the content suppliers as they can set the terms of licensing, which can include limitations on the number of streams, the length of time the content is available, and how much it costs, making costs less predictable and often more expensive for Netflix.

As the number of Netflix subscribers has substantially increased over time, it suggests that the preference for streaming video has overtaken the preference for physical DVD disks, which aligns with the shift from DVD rentals to streaming service models. Tiered pricing and buyers' purchasing choices further demonstrate how on-demand media pricing impacts market dynamics in the content delivery industry.