As you examined this week, Netflix and its competitors have faced interesting decisions regarding product offerings and pricing. As Netflix pursued offering online movie downloads in 2005, its primary competitor, Blockbuster, revised its product offering in response. In addition, both companies have examined the appropriate pricing schema to remain competitive with their respective product offerings. •Develop simple cost-volume-profit models for Netflix and Blockbuster.
•What is the unit volume break-even level of Netflix?
•What is the break-even revenue level of Blockbuster?
•How can Netflix and Blockbuster achieve profits equal to 10% of revenues?
•How can Blockbuster improve profitability given the CVP model?
•What conditions would allow Netflix to increase price, and how would that affect profits?