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Netflix Stock Jumps 9% on Ad-Tier Growth, Currently Trading at $371
Netflix Inc (NASDAQ: NFLX) recently saw its stock jump more than 9% on commendable ad-tier growth. On Wednesday, the entertainment and mass media company unveiled details about its new ad development to advertisers. Netflix said its new ad-supported tier is growing, as a quarter of its new subscribers chose the option. In addition, the streaming giant revealed that the cheaper ad-supported tier has a monthly active user base of 5 million.
Wednesday’s session marked the first time that Netflix would pitch to advertisers and was also the company’s inaugural participation in the industry’s ‘Upfront presentations’.
Media companies that once relied on boosting subscribership numbers for their struggling streaming services are now leaning toward advertising models. For instance, other media platforms participating in this year’s Upfront presentations include NBCUniversal and Warner Bros. Discovery (NASDAQ: WBD).
Netflix stock surged on Thursday and was up 9.22% as of press time at $371.29. The streaming and production company launched its ad-based option late last year following stagnated subscriber growth. Netflix’s quarterly subscriber growth struggles were underscored in Q1 2022 when the company’s shares plummeted by over 25%. At the time, the popular streaming also lost subscribers for the first time in more than a decade.
Netflix Stock Could Rise Further Following Userbase Growth & Password-Sharing Crackdown
Although Netflix’s most recent quarterly outing reflected mixed results, the company added 1.75 million subscribers. Meanwhile, Netflix’s bottom line for subsequent quarters could see even more revenue as the company prepares to crack down on password-sharing. Also, its ad tier agenda marks a U-turn from management’s previous stance that it would not prioritize ads. Netflix’s ad tier costs $6.99 monthly and features commercials up to 30 seconds in duration before and during a video.
Last December, Netflix’s co-CEO Ted Sarandos said the company could offer multiple ad-based subscription plans in the future. At the time, Sarandos explained:
“We have multiple tiers today, so it’s likely we’ll have multiple ad tiers over time, but nothing to talk about yet. And the product itself will evolve, I suspect, pretty dramatically, but slowly, gradually.”
In the fourth quarter of 2022, the co-CEO also addressed the upcoming password-sharing crackdown vis-à-vis increasing prices. Although he admitted that the development irks customers, Sarandos also pointed out:
“There are folks who are enjoying Netflix, literally for free today. So, they’re getting a lot of value out of it. I think they’ll be happy to have their own account.”
Furthermore, the Netflix executive added that Netflix remains committed to making customers see the value in its offerings.
Changing of The Guard at Netflix Helm
In January, Sarandos took over the helm alongside then-COO Greg Peters after Netflix co-founder Reed Hastings stepped down to become Executive Chairman. At the time, the departing Hastings expressed confidence in his successors’ abilities and said they helped Netflix through challenging times. Despite the company’s inauspicious start to 2022, it was able to round off well.
After re-evaluating its operational agenda ahead, Netflix remains braced to reaccelerate revenue growth while providing premium services for customers.
Netflix Stock Jumps 9% on Ad-Tier Growth, Currently Trading at $371
