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MGNT801 Economics and Markets (T1 2018) Assessment Task: Case Study Analysis 2 Due Date: 26 February 2018/10PMMaximum Word Limit: 2,000 wordsMaximum marks: 30 Note: There are five questions in this assessment task. Questions 1 to 4 integrate the topics of vertical integration/firm boundaries and information goods and are categorised under a single topic heading. A question related to the topic of labour markets is separately categorised below. Topic: Vertical integration/firm boundaries and Information goods Netflix is a streaming service that essentially deals in information goods. Utilising the sources provided below, supplemented with your own independent research, derive insights on Netflix’s business model and cost/revenue structure. Using these insights, answer the following questions 1 to 4. 1. Explore the possible forms of technical economies likely exploited by Netflix and its content creation partners? Review the media sources provided and identify and explain instances where such technical economies are present? [6 marks] [Further breakdown of marks based on marking rubric criteria: Understanding and application of theories, concepts and models (3 marks); Quality and application of research - as evidenced by the use of quality sources and the stimulus material provided, and clarity, conciseness and coherence of arguments – in support of analysis (3 marks)] 2. In class we discussed the nature of the information economy favouring a networked structure instead of integrated hierarchies. But vertical integration also makes less sense under specific conditions discussed in class. Netflix has increasingly engaged in integrating some key elements of its value chain, for instance, creating in-house content. Out of the scenarios where vertical integration makes less sense, which ones are the least applicable to Netflix? Please explain and justify. [6 marks] [Further breakdown of marks based on marking rubric criteria: Understanding and application of theories, concepts and models (3 marks); Quality and application of research - as evidenced by the use of quality sources and the stimulus material provided, and clarity, conciseness and coherence of arguments – in support of analysis (3 marks)] 3. The traditional richness vs reach trade-offs do not usual apply to Information goods. Discuss this trade-off and the three aspects of richness in the context of Netflix. How has the richness vs reach trade-off been overcome by Netflix through its streaming service? [6 marks] [Further breakdown of marks based on marking rubric criteria: Understanding and application of theories, concepts and models (3 marks); Quality and application of research - as evidenced by the use of quality sources and the stimulus material provided, and clarity, conciseness and coherence of arguments – in support of analysis (3 marks)] 4. What is the nature of revenues and costs of Netflix as a provider of information based product? Carefully review Hardy (2018) and other sources provided, and identify possible implication(s) of the structure of Netflix’s Variable Costs (VC) and Marginal Revenue (MR). What aspect of ( Page 1 of 3 ) Netflix’s behaviour can be explained by looking at the unique nature of Netflix revenues? [6 marks] [Further breakdown of marks based on marking rubric criteria: Understanding and application of theories, concepts and models (3 marks); Quality and application of research - as evidenced by the use of quality sources and the stimulus material provided, and clarity, conciseness and coherence of arguments – in support of analysis (3 marks)] Topic: Labour markets 5. It has been reported recently in the media that the Australian labour market has been experiencing sluggish growth in wages, but worker productivity has been steadily growing over the last few decades. What does the labour market model say about the link between labour productivity and wages? What are the factors behind this divergence between productivity and wage growth? To justify your response to this question, make sure you use relevant models and concepts, supported by evidence from relevant, quality sources. State clearly any assumptions you make. Please note that this question requires independent research as stimulus articles have not been provided. [6 marks] [Further breakdown of marks based on marking rubric criteria: Understanding and application of theories, concepts and models (3 marks); Quality and application of research - as evidenced by the use of quality sources, and clarity, conciseness and coherence of arguments – in support of analysis (3 marks)] Stimulus sources on Netflix Vena, D. (2018, January 25) ‘What You Missed in Netflix's Quarterly Report’ The Motley Fool. Retrieved from: https://www.fool.com/investing/2018/01/25/what-you-missed-in-netflixs-quarterly-report.aspx Hardy, R. (2018, February 16) ‘Netflix, MoviePass and how technology is radically redefining the movie business’. Retrieved from: https://newatlas.com/netflix-moviepass-theater-industry-technology- distruption/53426/ Rose, L (2014, June 18). “Netflix's Original Content VP on Development Plans, Pilots, Late-Night and Rival HBO (Q&A)’. Retrie ved from: https://www.hollywoodreporter.com/news/netflixs-original-content-vp- development-712293 Ovide, S. (2018, January 23) ‘Netflix's Growth Is in the Eye of the Beholder’ Retrieved from: https://www.bloomberg.com/gadfly/articles/2018-01-22/netflix-earnings-growth-is-in-the-eye-of-the- beholder Semios, Z. (2016, December 9) ‘White Rabbit Project: how to make a series for Netflix’ Mumbrella. Retrieved from: https://mumbrella.com.au/mumbrella360-video-pitch-branded-content-idea-tv- network-brand-innovation-stage-414622 Thomson, A. (2018, January 28) ‘Meet Netflix’s Indie Content Team, at Sundance and Beyond’ IndieWire. Retrieved from: http://www.indiewire.com/2018/01/netflix-indie-content-production-sundance-2018- private-life-1201921906/ Willy Shih (2014) ‘Netflix in 2011’. Harvard Business School Publishing [available on iLearn] Yarrow, J. (2015, February 14) ‘Netflix will spend $5 billion on programming in 2016, more than everyone but ESPN, says Janney’. Retrieved from: https://www.businessinsider.com.au/netflix-will- spend-5-billion-on-programming-in-2016-2015-2?r=US&IR=T