Why the revenue-sharing scheme is more profitable

Reference no: EM132125566

Question: The producer of a movie has sole rights to make DVDs of it and is thus a monopolist in that particular movie. Assume that Blockbuster Video also has a near-monopoly on retail rentals. The producer could charge Blockbuster $85 for the DVD and let it choose the rental price. Producers found, however, that it is more profitable to charge Blockbuster a low rate to purchase the video (about $8) and then require it to send them 40 to 60 percent of the gross revenue on rentals of that DVD. Explain why the revenue-sharing scheme is more profitable for both parties than the alternative.

a. For what types of movies do you expect that the producer will insist on receiving 60 percent of the revenue rather than 40 percent? Explain.

b. Might your previous answer be related to characteristics of the audience, for example, the importance of a younger and more computer-literate demographic that can more easily obtain illegal copies?

Reference no: EM132125566

Questions Cloud

Recommend the general hiring guidelines and process : Recommend the general hiring guidelines and process as a list of minimum of seven steps for a firm to legally current legally flawed process and procedures

Describe the type of business information : Case question The Aggressive Ad Agency, describe the type of business information that the agency is offering to Microsoft, and why it could be unethical

Why might you expect to see flat royalty payments : Why might you expect to see flat royalty payments in home-based franchises but revenue-based royalties in franchisees that operate from commercial buildings?

Review problem on revenue-sharing franchise contract : Why might McDonald's and its franchisees disagree on the proper retail price to charge? How do the incentives of the parent and its franchisees differ under.

Why the revenue-sharing scheme is more profitable : The producer of a movie has sole rights to make DVDs of it and is thus a monopolist in that particular movie. Assume that Blockbuster Video.

How might manufacturer try inducing the dealer to set price : An auto manufacturer gives franchised dealers exclusive service territories, and the law allows dealers to set prices as they wish.

Why the company might have picked now to integrate : DeBeers, the dominant firm in diamond mining and wholesale marketing, has until recently been unintegrated into any downstream activities.

Review problem on particular type of coal : Some large coal-burning power plants are located at the mouth of a mine and have been designed to burn coal specifically extracted from that mine.

How does increase the value that franchise agreement create : In fast food we often see that a single franchisee owns all the outlets in a certain area that may be as large as a city. How does this increase the value.

User Account

All Pages