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17 Jul 2024, 07:00
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Difficulty:
15%
(low)
Question Stats:
86% (01:56) correct
14%
(02:13)
wrong
based on 451
sessions
History
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A leading streaming service company has introduced a new pricing tier that allows users to watch shows and movies with advertisements at a reduced cost. The company is concerned that this cheaper ad-supported tier might lead to a significant decline in subscriptions to its more expensive, ad-free service. To mitigate this, the company plans to restrict access to its most popular original content exclusively to subscribers of the ad-free tier.
The company's plan assumes that:
(A) Subscribers primarily choose the ad-free tier to avoid advertisements, not necessarily for exclusive content.
(B) The availability of popular original content will be a decisive factor for many users when choosing between the ad-supported and ad-free tiers.
(C) The reduced cost of the ad-supported tier will not significantly increase the total number of subscribers to the streaming service.
(D) Most current subscribers to the ad-supported tier consider the price difference between the two tiers to be prohibitively large.
(E) Other streaming services do not offer their premium content to subscribers of their lower-priced, ad-supported plans.
The company's plan assumes that:
(A) Subscribers primarily choose the ad-free tier to avoid advertisements, not necessarily for exclusive content.
(B) The availability of popular original content will be a decisive factor for many users when choosing between the ad-supported and ad-free tiers.
(C) The reduced cost of the ad-supported tier will not significantly increase the total number of subscribers to the streaming service.
(D) Most current subscribers to the ad-supported tier consider the price difference between the two tiers to be prohibitively large.
(E) Other streaming services do not offer their premium content to subscribers of their lower-priced, ad-supported plans.
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17 Jul 2024, 08:00
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GMAT Club Official Explanation:
Correct Answer: B. The availability of popular original content will be a decisive factor for many users when choosing between the ad-supported and ad-free tiers.
B) tells us that by restricting access to popular content to only the ad-free tier, the company can effectively incentivize subscribers to opt for or remain on the more expensive plan. It presumes that this exclusive content is compelling enough to influence subscription choices, directly impacting the plan's effectiveness.
A. Subscribers primarily choose the ad-free tier to avoid advertisements, not necessarily for exclusive content.
(A) suggests that the absence of ads, not content exclusivity, is the main draw for the ad-free tier. It contradicts the premise needed for the company’s plan to work effectively. This is not the company's assumption. Eliminate.
C. The reduced cost of the ad-supported tier will not significantly increase the total number of subscribers to the streaming service.
This answer choice does not directly impact the argument. If the company assumes that the ad-supported tier will not increase the total number of subscribers, it could mean that they are not expecting new customers to sign up but it does not say anything about existing customers switching. This answer choice is incomplete and does not support the argument. Eliminate
D. Most current subscribers to the ad-supported tier consider the price difference between the two tiers to be prohibitively large.
(D) is a trap choice. It is talking only about the ad-supported tier of subscribers. We are not concerned about this group upgrading but rather about the paid group downgrading. Also, we do not know how large this group is and whether these are people just signed up or downgraded to this new plan. This is a trap choice designed to make you think that paying customers will defect to the ad-supported plan. However, while this tier subscribers may not upgrade to the ad-free tier, we do not know if the ad-free subscribers share the same sentiment to downgrade. Eliminate.
E. Other streaming services do not offer their premium content to subscribers of their lower-priced, ad-supported plans.
(E) The plan is not concerned about the competitors - it is concerned about cannibalizing their own customers who may switch from the paid to ad-supported tier and thus this answer choice is irrelevant. Eliminate.
General Discussion
17 Jul 2024, 07:55
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A leading streaming service company has introduced a new pricing tier that allows users to watch shows and movies with advertisements at a reduced cost. The company is concerned that this cheaper ad-supported tier might lead to a significant decline in subscriptions to its more expensive, ad-free service. To mitigate this, the company plans to restrict access to its most popular original content exclusively to subscribers of the ad-free tier.
The company's plan assumes that:
(A) Subscribers primarily choose the ad-free tier to avoid advertisements, not necessarily for exclusive content. => It is the other way around.
(B) The availability of popular original content will be a decisive factor for many users when choosing between the ad-supported and ad-free tiers. CORRECT => People would pay more for most popilar original content
(C) The reduced cost of the ad-supported tier will not significantly increase the total number of subscribers to the streaming service. => The opposite is the case.
(D) Most current subscribers to the ad-supported tier do not consider the price difference between the two tiers to be prohibitively large. => Not true. Otherwise they would all choose the ad-free service.
(E) Other streaming services do not offer their premium content to subscribers of their lower-priced, ad-supported plans. => Not relevant
The company's plan assumes that:
(A) Subscribers primarily choose the ad-free tier to avoid advertisements, not necessarily for exclusive content. => It is the other way around.
(B) The availability of popular original content will be a decisive factor for many users when choosing between the ad-supported and ad-free tiers. CORRECT => People would pay more for most popilar original content
(C) The reduced cost of the ad-supported tier will not significantly increase the total number of subscribers to the streaming service. => The opposite is the case.
(D) Most current subscribers to the ad-supported tier do not consider the price difference between the two tiers to be prohibitively large. => Not true. Otherwise they would all choose the ad-free service.
(E) Other streaming services do not offer their premium content to subscribers of their lower-priced, ad-supported plans. => Not relevant
