Streaming media platform Netflix saw its stock value rise by 5% as the trading day wound down to a close on Thursday, October 13th, after it gave investors a clearer idea about its reengineered advertising tier.
Likewise, shares for the company leveled out the following day, trading flat during mid-morning proceedings while analysts made their forecasts regarding the impending announcement.
What’s the Buzz All About?
Netflix is set to launch a somewhat controversial new subscription plan, Basic with Ads, on November 3rd – over a month before rival platform Disney+ launches its own ad-driven subscription offering on December 8th.
Set to cost around $6.99 monthly in the United States and made available in eleven other countries, Basic with Ads is seen as a complement to the platform’s current range of ad-free subscription packages. Countries that can avail of Basic with Ads include Australia, Brazil, Canada, France, Germany, Italy, Japan, Mexico, South Korea, Spain, the United Kingdom, and the United States.
However, consumers are anything but excited about the new plan. While more reasonably priced than its regular subscriptions, the number of shows and films available for Basic with Ads users is limited compared with several popular offerings unavailable – around five to ten percent of total programming – due to licensing restrictions in its target countries. Likewise, subscribers signing up for the plan are barred from downloading content due to technical issues.
Ad-free programming, a long-time hallmark of Netflix, is not a given here. Programming on the Basic with Ads plan features an average of around four to five minutes of ads an hour with tight frequency caps, meaning users won’t see the same ads on repeat.
The Experts Weigh In
Meanwhile, these recent developments prompted financial analysts to rethink their current forecasts about the company.
UBS’ John Hodulik increased his price target on Netflix stock from $52 to $250 per share on the possibility that the platform’s ad tier could boost around 10% to its overall revenue soon. But Hodulik also warned that it would take time for Netflix to scale, given current issues involving foreign exchange and other macroeconomic factors which could diminish any benefits.
For his part, JPMorgan’s Doug Anmuth remarked that the lower price point of Basic with Ads is a sign that Netflix is confident in the revenue it stands to earn from advertisers.