Question

Netflix is Almost as Popular as Cable Among Young Adults % of American adults who subscribe to the following Pay-TV services, by age (as of October 2013) 18-36 37-4849.6768 70% 63 60% 50% 4648 43 31 28 30% 25 21 16 17 15 10 NETFLIX amazon Prime huluPLUS Cable TV Satellite TV 2.368 U.S. adults tatista Mashable Source: Harris Interactive The Statstics Portal 2014: Amazon And Hulu Could Slow Netflix Growth In 2014, Morgan Stanley Says Original series like House of Cards and Orange Is The New Black may have helped lift Netflix NFLX-5.2% to new heights in 2013, but could the fever start to fade in 2014? According to a new report from Morgan Stanley MS-05196, Kevin Spacey and Taylor Schilling might not be enough to fend off competition from Amazon, Hulu and HBO GO Morgan Stanley downgraded shares of Netflix Tuesday morning, lowering its rating to underweight from equal-weight and adjusting its target price to $310 per share, down from $333 per share. While the rate of consumers discontinuing their subscriptions may be approaching record lows- a projected 3% by the end of 2014-lead analyst Scott Devitt writes that increased competition from Amazon Prime Instant, Hulu Plus and HBO GO could take away Netflix's ability to grow its subscriber base in 2014. "We believe digital video distribution has become largely commoditized and it may be easier for some Netflix competitors to gain their next 5 million users than it will be for Netflix," Devitt says, noting that Amazon and HBO in particular likely have millions of paying customers who do not yet use their

1. What type of market structure best describes this market? Provide specific evidence to support your claim, including (but not limited to) the actions of the firms and the characteristics of the market.

2. If you were Netflix, what might your future course of action be? Why?

3. If you were Amazon, what might your future course of action be? Why?

Answer 1

a.) Monopolistic competition market will describe this market because a monopolistic market refers to a form of market where there is large numbers of buyers and sellers available but every seller has different product from others hence both of this market are almost same but still has product differentiation both have selling cost and both are non price competitive hence all the feature are same as monopolistic competition market so we can say this a type of monopolistic competition market.

b.) Being Netflix it will be better to have some new product which can lead this market into a new era so customer can get attracted.

c.) Being Amazon it will be easy to capture market because almost people are aware from business of amazon hence by improving video qualities and by new videos it will be easy to capture market.