Thursday, September 29, 2011

Netflix Users Are Faced With A Challenge

Netflix users are facing a new dilemma.  In an effort to increase their profits Netflix has split into two different firms, Netflix and Qwikster, and separated their two services by giving Netflix the video streaming capabilities and Qwikster the DVD’s-by-mail capabilities.  At the same time, the company is raising their prices.  This has had unforeseen consequences, however, and more and more customers are looking for alternative firms that provide the same service.  The Substitution Effect can be seen in this predicament.  Outraged by raised prices and the necessity to create another account with Qwikster, Netflix users are leaving Netflix and giving more business to its substitutes.  Services like  Redbox, Hulu Plus, and even Apple’s iTunes are experiencing newly-found success in a market previously dominated by Netflix.  Even though travelling to a Redbox station or creating a Hulu Plus account may require some extra effort, customers are considering these to be a better solution than the opportunity  cost : paying more for the same service from Netflix.
Paxton S

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