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Netflix, Hastings Get it Right By Roger Ebert

Netflix is an online high quality video streaming service provided to customers at a monthly cost. The corporation used to provide DVD mailing services with the membership fee without extra cost. At July of 2011, the CEO of Netflix- Hastings announced that online and mailing video service will be divided into two services charging two prices. Obviously, the CEO sensed he made the wrong decision when thousands of customers terminated the use of Netflix. The Netflix dropped fifty percent in sales, however, Hastings refuse to take back the decision and visioned the market will continue to grow.

Just based on the calculation of elasticity, the outcome of this incidence shows the demand is relatively elastic, consumers’ response to the change in price is directly related to the drop in sales. However, in the long run, Netflix only lose less than 1/10 of the consumers due to the increase in price. Clearly, Netflix is still aiming to make money from remaining consumers; it is seen as a marketing strategy.