If Netflix Introduces an Ad-Supported Tier, Revenue Could Soar 20%
It hasn't been a good year for Netflix (NASDAQ: NFLX) investors. In the first quarter, the streaming pioneer reported its first subscriber loss in more than a decade, sending its stock into free fall, losing more than a third of its value overnight, resulting in an overall loss of 75% since its high reached late last year.
In the wake of this uncharacteristic member decline, Netflix management announced a change to its long-standing business model. In addition to its flagship subscription service, it now plans to offer an ad-supported tier, something the company has long resisted. The recent decision to offer a lower-priced level that includes advertising could mark a fundamental turning point for Netflix and estimates suggest that its revenue could surge, fueling a rebound for its flagging stock price.
Much like offerings from Walt Disney's Hulu and Warner Bros. Discovery's HBO Max, Netflix plans to offer a lower-priced tier that uses occasional advertising to defray the typical subscription cost. The company has yet to decide on specifics, such as the number of hourly ads and the price point of its ad-based video on demand (AVOD) service, which will ultimately impact its subscriber and revenue gains. Investors can, however, use estimates to get close.
Source Fool.com
