Media outlets such as ESPN anti Fox Sports often have Web sites that provide in-

Question

Media outlets such as ESPN anti Fox Sports often have Web sites that provide in-depth coverage of news and events. Portions of these Web sites are restricted to members who pay a monthly subscription to gain access to exclusive news and commentary. These Web sites typically offer a free trial period to introduce viewers to the Web site. Assume that during a recent fiscal year, ESPN.com spent $4,200,000 on a promotional campaign for the ESPN.com Web site that offered two free months of service for new subscribers. In addition, assume the following information: Determine the number of new customer accounts needed to break even on the cost of the campaign. In forming your answer, (1) treat the cost of the promotional fixed cost, and (2) treat the revenue less variable cost per account for the subscription period as the unit contribution margin

Explanation / Answer

BEP ( subscribers)   = $4,200,000/ 5*12

                                   = 70,000 subscibers

(since out of 14 months 2 months are free so contribution per unit can be earned for 12 months only)

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