Monday, April 7, 2014

Amazon Hikes the Price

Written by Olivia Ritchie



The fast pace of technology growth has put online shopping in the spot light. Consumers are drawn to the convenience of shopping from their own home and retrieving their items from their doorstep. The benefit that comes from this convenience exceeds the opportunity cost of testing the product in stores or forgoing the price of shipping and handling. This puts companies, like Amazon, on the forefront of consumer convenience. They have offered Amazon Prime in the United States since 2005 and since then membership has grown to 20 million users. The program offers free shipping, free instant video access, a library lending system, and a free book download each month.

According to finance.fortune.cnn.com, “The Seattle-based online retailer sent emails to both its regular Prime and student membership program customers announcing a $20 price increase for the regular membership (from $79 to $99) and a $10 increase for students (from $39 to $49)”. The article goes on to argue that the price increase made sense due to Amazon Prime’s incredible recent growth. The company claims that this growth rate has peaked and the wiser investment would be, “spending money on better content for its video streaming services and continuing to build out its fulfillment-center infrastructure so that it can efficiently ship to every corner of the country in two days or less”. In other words, the price increase is expected to build revenue so Amazon can expand.



The graph above shows the profit margin trend that Amazon experienced from 20015 to late 2012. Profit margin is defined as the amount of revenue that exceeds costs. Amazon experienced an explosive 20% increase in profit margins in 2013, not seen on this graph. The company claims this as justification for a price increase. However, Amazon is taking a huge risk. They are raising prices without adding any additional benefits to the Prime package. According to Forbes.com, “Amazon is rumored to be getting ready to roll out a music streaming service, along the lines of Apple’s iTunes Radio as well as a set-top box akin to the Roku or AppleTV”, but this is not certain as of now. Therefore, Prime customers face a choice: pay $20 more for the same package they’ve received the past 9 years, or go without the convenience of Amazon Prime. It is, again, a cost to benefit ratio.

In my opinion, Amazon is taking too large of a risk. A 25% price increase is not something most consumers would ignore. It is clear that Amazon has created something unlike any other company with its Prime package, however, increasing the price simply because they can is not going to sit well with customers, and definitely not with any potential members.


Geekwire further analyzes the potential consequences of Amazon’s decision, reporting that, “Amazon’s rating fell from 93 percent to 83 percent in the two days following the price hike”. For company that has been known for its low prices, is this really a smart move?
WORK CITED


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Thursday, April 3, 2014

Divergent Vs. The Hunger Games

Divergent Vs. The Hunger Games
Written by Amanda Koplien 

The weekend of March 22nd, consumers set out to witness the screenplay version of the novel series phenomenon, Divergent, by Veronica Roth. The story tells of a futuristic city divided into five groups, determined by a characteristic aptitude test and a female heroine’s attempt to help make peace among the system when one of the groups rebel. Sound familiar? The release of the new movie was given harsh reviews, being continually compared to the recent success series, The Hunger Games. Will the success of the Divergent series be altered or embraced thanks to the overwhelming success of The Hunger Games?



Upon opening weekend of new movie, Divergent, consumer spending totaled to approximately $60 million compared to the opening weekend of The Hunger Games which brought in about $152.5 million after just the first few showings. When reviewing these numbers, the new series does not seem to compare to the original phenomenon but that didn’t stop Divergent from hitting #1 in the Box Office. To look at in perspective, another popular movie of 2014, Endless Love, brought in about $30 million revenue it’s opening weekend—Divergent doubling their earnings entirely and proving that this film is still an incontrovertible sensation when compared to movies besides The Hunger Games.

While the film was still wildly successful, the production cost of Divergent had been originally set at a budget of $40 million—a generous number for the first movie of a series—and was increased to $85 million after competition arose with The Hunger Games when producers endorsed about $88 million in production spending on movie number one in the four part series. On opening weekend alone, Divergent had not yet made a marginal profit on their sales, being still below the profit margin by $25 million while The Hunger Games brought in about $70 million revenue on the first weekend alone. With this being said, at the rate which the new movie is taking off, their profit is estimated to skyrocket after the first full week of showings.



It is estimated by Hollywood Critic Lucas Shaw of The Wrap that overall, Divergent will reach “gross close to $350 million” bringing in $265 million marginal profit while it is still in theaters and will continue to grow once the movie comes out on DVD and hits the shelves, estimated to arrive in August of 2014. As a film standing on its own, Divergent is receiving an incredible marginal benefit regardless of its “competitor” series released before it.

Even with such incredible revenue coming from the new Divergent series, The Hunger Games accumulated over $400 million in theaters alone. After the success of the first movie, the Lionsgate Entertainment production company brought in over $424 million in ticket sales from the sequel The Hunger Games: Catching Fire, with a production cost of $130 million—quite a jump from the first movie budget of $88 million—Lionsgate was left with just under $300 million in marginal profit, which continues increasing each and every day.

Divergent is only the first of the 3 part trilogy series, planned to be released in three movies reflecting each book individually. Talk has been had as to why the Divergent series is not planning to split the third book into two movies, in turn, increasing their gross income similarly to many other recent, successful films such as The Twilight Saga: Breaking Dawn Part 1 and Part 2, Harry Potter and the Deathly Hallows Part 1 and Part 2, and coming soon, The Hunger Games: Mockingjay Part 1 and Part 2. Each of these series’ made the executive decision to break the final book up into two separate movies in order to expand the growth of the phenomenon and continue exponentially increasing revenue on the already successful series. It seems as though Lionsgate is in no way worried about the success of the movie and believes that the following movies in the Divergent series will do well without the need to force an extension in order to keep their fans interested.

It is still unclear as to why critics claim the series to be unoriginal and unsuccessful for their achievement has created a nationally known phenomenon in a matter of a few weeks, being compared to The Hunger Games, one of the most successful series of our generation. The sensation of the series is expected to expand over the next few years as release dates of the finale two movies have been revealed and fans continue to rave over the story of the Divergent.

Works Cited







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The Capital of Art

Patrick McCoy


The Capital of Art

            Almost every day I hear the drone of aggravated people who claim that the “arts” have no real benefit for the American economy and that going to school to study in a more liberal environment and career field is wasteful. However, recent reports have shown that the music and film culture in the United States has significantly contributed to the economy. With our society becoming more and more intertwined and in tune with the world we live in, it is imperative that we recognize our domestic output capabilities for the international community.
            The world absolutely loves American movies, because our massive budgets pump out big name films every year: the Hunger Games, Divergent, and Godzilla for example. All of these films dive head first into countries abroad and their consumers gladly spend their money to see them. The artistic movie and music industry has created a staggering 1 trillion dollar for the American GDP – the summation of national consumption, investment, government spending, and net exports. Essentially, the gross domestic product conveys a numerical value for a nation’s productivity in dollars. These benefits have actually trickled down to the workers within these industries as well; boosting their salaries 33% above the average American pay. This industry only seems to be growing as the world becomes richer, but these jobs must be protected in order for the output to continue producing at this impressive rate.
            How does one measure the economic benefits of the creative community? Analysts have defined “arts and cultural output based on creative artistic activity and the goods and services produced by it or used to support it” as the optimal measurement for this industry’s output potential, much like calculating the national GDP. By calculating the revenue of this industry using these specific guidelines, economists are This is why the music industry is so asinine about millions of potential customers downloading music illegally which, as a result, forces live concert ticket prices to increase astronomically. If you truly support a particular artist or band, buy their music. You’ll be doing the economy a great service.
            The only down side to the creative market is that there are a plethora of goods and services that have no durability, meaning that they’ll lose their value entirely in a short period of time. Examples of this phenomenon include columns, blogs, and magazines; all items that will have no true value to consumers unless they’re looked back upon as significant historical mementos. Because of this, most of these items are excluded from the revenue of this industry while calculating national GDP.
So, how exactly will this affect our economy down the road? If we continue to promote the arts, we could very well retain our dominance in the movie and artistic industry worldwide; which is why we cease belittling the efforts of those who wish to peruse such a career.

 











http://www.cookcountyclerk.com/newsroom/newsfromclerk/PublishingImages/TIF%20Chicago%20Revenue%20By%20Year%201986%20-%202010.jpg
           
Sommer, Jeff. "Getting Creative With the G.D.P.." The New York Times. The New York Times, 27 July 2013. Web. 1 Apr. 2014. <http://www.nytimes.com/2013/07/28/your-money/getting-creative-with-the-gdp.html?_r=0>.


"The Hollywood Reporter." The Hollywood Reporter. N.p., n.d. Web. 1 Apr. 2014. <http://www.hollywoodreporter.com/news/hollywood-creative-industries-add-504-662691>.
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The Intense and quite Seductive Economics of Chapstick

Ryan Honeck
Mrs. Straub
Economics
31 March 14

The Intense and quite Seductive Economics of Chapstick

Every American has used chapstick or lip balm at least once in their life, if not you must be a unique subspecies of the human race, the average tube of chapstick runs in a 1 to 3 dollar range, depending on how much one is willing to spend to get ride of their dry, crackly lips, or if they just are feeling super spunk and sassy and decide to purchase an egg shape of lip balm. As I was saying, they all carry their own in popularity and personal preference dominates the monopolistic competitive market. But are we really getting the bang for our buck? I have yet to find a person that consistently finishes their tube of chapstick without losing for a brief period of time or having it fall into oblivion, never to be seen again. A small wager of 3 dollars for a stick of chapstick can seem miniscule at first glance, but when you go onto your 3rd or 4th stick in one month, the numbers start to add up, benefiting the producer, but frustrates the consumer.

The production of chapstick costs around .28 for the most prestige of lipbalm, allowing room for a 1250% profit. The international lipbalms companies of the world (ILCOTW) have found the perfect equilibrium price for a necessity to a large majority of Americans, this allows them to exploit of necessities, while avoiding being burdened with a surplus. The lip care business is booming, with a mind boggling stat that “Americans spent about $417 million on lip care”. This is dominated by the brand Abreva, racking in 90 million dollars, which is still significantly higher than the ever popular and ever booming WNBA.

The lip care business will never decline, unless Americans stay inside the rest of their lives and never lick their lips and even if everyone were to be free from the clutches of having dry lips, the companies will be gaining money because chapstick and lip balm are actually, there is a chapstick anonymous group and they even provide a 12 step program, very similar to the one use for substance abuse addicts for the struggling addict. The psychological dependence on chapstick not only benefits the companies, but it can also bring in some extra Benjamins for the struggling psychologist. It has not been proven whether the chapstick companies purposely made the sensation of chap stick release addicting, but that’s a different story.

If chapstick companies were as half as smart as Mrs. Straub, they would cut the price in half, and the amount of chapstick in the tube provided, then this would make the people more likely to finish their products, and they won’t feel a certain hatred toward the company. This would change the equilibrium price, while keeping their percentage of profit.

The lip care business is a tricky business to avoid, no one has the willpower to not lick their lips in a dry environment, so the businesses will continue to make millions and they will continue to keep the price of lip balm a little to high for the comfort of my 3 dollar a month income.

http://www.statista.com/statistics/195299/leadinguslipbalmbrandsin2010and2011basedo
nsales/

http://www.everydayhealth.com/healthyliving/
islipbalmaddictionreal.aspx

http://www.bulkapothecary.com/createlipbalmbrand/
http://www.lipbalmanonymous.com/islipbalmaddictive/
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How much money do colleges really make?

How much money do colleges really make?
By: Justin Leeds
        Colleges have way too much power. To start off a college can control education and money flow for a local economy. If a college has a large name sports team like the Alabama or Duke that alone brings in millions of outside money to the local economy. Some colleges even build up large surpluses

A college is classified as an educational institution or establishment, in particular. Some of these colleges can be anywhere from 62 thousand a year to free depending on level of school and other outside factors. But did you know that some of these colleges might as well become banks with all of their extra income. According to The Ten Richest College Harvard has more than $30 billion, but this isn’t just Ivy League school building up large stacks of money, Michigan has saved up nearly 8 billion to lead the big ten as the richest school. Not all of these schools have built up these bank like funds from high tuition. University of Michigan- Ann Arbor only cost 25 thousand in state. All of this saved money is slowing down the economy from operating at its maximum potential.
This is not to say that Universities should spend all of there money and live tuition to tuition but there is no reason for holding an excess of over 5 billion dollars. Universities should be required to spend no less than 90% of their income to help create a much stronger economy. Not only will this directly increase the economy but with the multiplier effect the GDP for that local area will increase much larger than initial payment.

Not only do University make large amounts of money from tuition and alumni support but the athletic programs are not doing too bad either. According to USA today some colleges like, for say, Texas make 163 million dollars. Ohio State just edges out Michigan with 142 million a year just from their athletics programs. This is mostly outside money being brought to the town of the local sports team.

        These two reasons are why college towns do more than just exist but thrive. For example when Michigan (trying to keep a constant example, sorry if it seems like I am in love with this college) host a football game there will be over 110 thousand people in the stadium. Now all of these people start spending money in the college town’s economy instead of their local all of this money trickles down and leads to better money flow. Also as soon as graduation happens there are thousands of highly trained workers ready to join the work force in a quick way to be off of unemployment.
Now for all of this information is top end teams and colleges but the ability for a college to control a local economy is greater than the government in some extreme cases. Which leads back to the really question, do colleges hold too much power?
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Winter and Economics

Emmalee Gill

Through the long winter and trying weather conditions this winter, consumers and businesses have taken some hard hits. Not only are people frustrated and tired of the cold weather and snow but companies are struggling too.

NBC News’ article, “Financial Freeze: Winter Woes Cost the Economy $15 Billion” discusses the various areas in which the economy took a hit during these wintery months. Entertainment saw one of the largest effects from the weather as people stopped going out of their way to watch movies or go shopping because getting out and driving in the snow was more of a hazard where the benefit didn’t outweigh the cost of traveling. Restaurants had a disadvantage that other businesses did not; for all the people that did not come to their place, they would never get that money made up. People will not come in a restaurant and order three meals for some they missed a few weeks ago. Another business that was drastically affected by the winter is car dealers. Unfortunately, their sales dropped 2.1% or about $1.7 billion. Over time, this will be made up; however, for the time being, it puts dealers in a tight position. Because cars are an inelastic good but they are also durable and last awhile, this might take some time. Along with entertainment and car companies, industrial production slowed which was due to the large build up of inventory. The economy took a hit with property and crop damage too. There is nothing people can do about this but it caused food prices to increase, the supply to decrease, and the demand to increase for certain items. If those weather conditions were to stay the same, a potential shortage could occur in places like grocery stores or businesses such as Wal-Mart. Hopefully, the economy will bounce back in the second quarter after having a hard time increasing in the first quarter.

Cumulatively, the businesses that will not be able to make up the money will lose about $15 billion. Another issue that the weather this season has created is that in the South, they do not have the materials to clear roads and keep up with drastic weather conditions opposed to in the North where they are much more prepared. Due to the fact that weather has affected the entire nation, airline companies have had to submit to this unfortunate reality. Planes are not able to fly in that weather which caused over 49,000 flights to be cancelled. This however, caused a great benefit for these cancellation cities. Hotels, restaurants, and other businesses were able to pick up many of these consumers as their cancellations led them to extend their stays for on average 18 hours. These flight cancellations became a positive externality to this unfortunate problem.



Overall, everything evens out because although movie theaters and malls are emptier, more people are earning money plowing and keeping up with the weather. Yes, the economy has taken a hit but to make up for it are other businesses that are used more during times like this are benefitting.

Works Cited

"Economy Takes $50 Billion Winter Weather Hit." CNBC. N.p., n.d. Web. 31 Mar. 2014. <http://fm.cnbc.com/applications/cnbc.com/resources/files/2014/02/13/Winter-weather-impact-on-GDP-GDP-weather-impact_chartbuilder.png>.

"Fed confirms weather-related drag on U.S. economy in early 2014." Reuters. Thomson Reuters, 5 Mar. 2014. Web. 1 Apr. 2014. <http://www.reuters.com/article/2014/03/05/us-usa-economy-fed-idUSBREA2427W20140305>.


"Financial Freeze: Winter Woes Cost the Economy $15 Billion." NBC News. N.p., n.d. Web. 31 Mar. 2014. <http://www.nbcnews.com/storyline/deep-freeze/financial-freeze-winter-woes-cost-economy-15-billion-n29781>.
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Apple v. Android

Cal Condon

For most people in America, smartphone products are placed high on want lists. Technology is something everyone feels the need to keep up with. Apple is all about technology and staying modern, so people never lose interest in its products,they might add a product to be touch screen or add games for  another age group to enjoy products. Although the main debate in the cell phone business is Apple vs.  Android. In terms of numbers, Apple's App Store has earned about $4.9 billion in gross revenue for paid apps, while the Android Marketplace is estimated to have earned just $330 million in that market. Apple is beating Android in this area, primarily because of its overwhelming success in the paid apps market. While this is promising for apple, for the consumer not so much while Android offers many more free apps. Although androids apps are cheaper, it is said Apple has produced a much more organized app menu and is clearly easier to navigate. One huge aspect Apple has over Android is its innovative difference from any other brand. In terms of numbers, Apple's App Store has earned about $4.9 billion in gross revenue for paid apps, while the Android Marketplace is estimated to have earned just $330 million in that market. Apple is beating Android in this area, primarily because of its overwhelming success in the paid apps market.


As you can see in the graph above android is predicted to overtake apple in unit shipments. While many people believe apple is demolishing android in sales, I disagree. Android is big in tablets. The problem is that no one has a clue how big it is. While Apple happily reports its rising unit sales for tablets, Samsung and other major Android distributors are silent. Android leaves us in the dark as to just how many tablets are being bought and used.

According to The Economic Times, In a lawsuit, Apple is seeking about $2 billion in damages from Samsung for selling phones and tablets that Apple says violate five of its mobile software patents. Samsung, meanwhile, says Apple violated two of its patents. As you can see the debate is real, and very heated. Both sides are heavy competitors which is great for technology because both will be pushing each other to improve.

Android is in no doubt growing rapidly, and winning the smartphone phone marketshare. One question many wonder is will android ever catch up to apple in total downloads? Does this declare the winner of who's better? Apple is still the leader in revenues, with this trend likely to continue for the future. However, the battle between the companies is only beginning and many surprises will unfold in the coming years
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