Entertainment Pricing Decisions
This chapter challenges managers (and scholars) to think critically about pricing practices in entertainment. We review pricing theory and compare it to entertainment practice, stressing the dominance of uniform pricing (one price for all products, regardless of their respective quality) and blaming the “Nobody-Knows-Anything” mantra for it. We then discuss the pros and cons of differential pricing in entertainment, concluding that offering different products at different price points deserves closer attention, carrying the potential for better addressing consumer demand and providing higher revenues and profits for firms. We also make the case for looking for ways to price an individual product differently, considering three broad categories of price discrimination approaches and illustrating their applications in the context of entertainment. When doing so, we dedicate particular attention to “freemium” pricing models, a special kind of versioning.
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