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How does the subscription model work?

Madflix.com
New answer on Feb 18, 2021
2 Answers
1.2 k Views
Helena asked on Feb 18, 2021

Hi,

I have trouble understanding the subscription model. Let's take S1, for example. Customers pay 9.99 to rent one movie per month, right? But then in the table, it says the average monthly rental per customer for S1 is 6. How do they rent 6 movies per month if their subscription only allows for one? Do they buy the subscription 6 times per month? But then surely we would have much higher revenue?

In the video case solution, the candidate also talks about restricting monthly orders to make the customers profitable (everyone with 6+ rentals is unprofitable) but under the three subscriptions that are detailed in the question, how does anyone receive more than 3 movies?

I'm looking forward to your insights!

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Clara
Expert
Content Creator
replied on Feb 18, 2021
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

They way that I understand it is about how many hours you can see at the time time. Hence, with the S1 that you mention, paying 9.99 they can watch one at a time.

I guess is so you don´t have a whole family of group of friends sharing the same password, which is actually one of the risks that I would mention yes or yes with this business model.

Hope it helps!

Cheers,

Clara

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Luca
Expert
Content Creator
replied on Feb 18, 2021
BCG |NASA | SDA Bocconi & Cattolica partner | GMAT expert 780/800 score | 200+ students coached

Hello Helena,

I think that the answer is the the following part of the text:

Subscription models:

  • S1: 1 movie at a time / $9.99/month
  • S2: 2 movies at a time / $14.99/month
  • S3: 3 movies at a time / $19.99/month

This means that, if you choose S1, you can not rent more than one movie at the same time. Still, they can rent 6 movies and rent them per 5 days for each one, one after the other.

Is it clear?

Best,
Luca

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Clara gave the best answer

Clara

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McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut
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