Two major events relating to Harry Potter has happened over the past two weeks .One the release of the movie” Harry Potter and the Order Of the Phoenix”, and two the eagerly awaited book,” Harry Potter and the Deathly Hallows”. Since Iam a huge Potter fan, I have tried here to understand the economics relating to the teenage wizard.
Firstly Harry Potter, as a popular series of books is a huge industry for publishers. Scholastic holds the publishing rights for the book in the US while Bloomsbury has a absolute hegemony in allover the world rights (excepting US).The publishers do not however control the dynamics of the market. Retailers like Wal-Mart, Online stores like Amazon and Traditional Bookshops are all vying against each other for a share in the Potter Pie. This is where the issue of pricing comes in .Wal-Mart and Amazon has offered a flat discount of 50%, while the bookstores are not able to match their prices. Bookstores are skeptical about making any profits through the sale of the books this year, while Wal-Mart and Amazon.com are sure to rake in profits due to their competitive pricing strategies. Their pricing can be understood as follows. A quick look at the demand and supply curve will tell you that when demand and supply increase the price P would be depend upon the elasticity. Therefore different companies offer different rates depending upon their competitiveness.
The Market for Harry Potter books is according to theory”Perfectly Competitive”. It has many buyers and sellers and essentially the same product is being traded. But, we can safely conclude that the market is Monopolistic Competition due to the following reasons. The book being the same is being sold through different modes wherein huge differentiation exists. For example direct selling is different from, retailing which is again different from e-commerce. Since the supply chains here are essentially different, the product though the same is priced differently .Essentially the market is not a “Price Taker”. In order to stay competitive the companies try different advertising strategies/promotion campaigns. For example Amazon.com held this contest called “Harry –est.” town in America offering a reward of 5000$ for the town which accrues highest sales.
Huge popularity for Harry Potter has spun a mammoth allied market.This can be related to the concept of “Demand for a complement increasing when the demand for the core product increases”. The market estimated to be around 10 million USD consists of glasses ,watches books and games. Its a mini industry on its own. Recently Warner Bros has planned to set up a theme park totally dedicated to Potter ,costing around half million dollars by 2009.
The greatest Cash Cow due to the Potter Mania is Warner Bros which has already earned close to 330 million dollars in the opening week of the movie.Everytime a Potter movie releases Warner Bros Stock prices go up, while in the lean period they go down.
Though the last book has been released, it doesn’t spell the end of Potter mania, publishers hope to earn close to 10 million USD, a year through sales of the seven books in future.
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4 comments:
For the initial couple of day's sales, I think the price did not matter at all. Most people who bought on the first day bought it at close to the without discount price.
Well, I dont know about any of that.. All I know is that I loved the last book! Hail JK Rowling!!!
PS: Do you know who this is?
What Madam , paining aam aadmi like us by the eco fundaes learnt in the MBA ?? :P
Well written though, the jargon aside, I was able to follow everything else :)
looks like ony of those 'boring' case studies form a mic-eco book :p
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