Netflix’s new ‘low price’ with ads is getting love and hate

Netflix is working on a banner ad subscription to inform viewers of the cost of maintaining content generation and attracting new customers. The company is hungry. The world’s leading streaming service is getting aggressive on the promotional front after experiencing back-to-back quarters of back-to-back subscriber declines. So he thinks a cheaper version could calm the waters.

However, the one question no one can answer yet until Netflix activates this strategy is whether it will ultimately help or hurt the company’s bottom line. And Wall Street analysts appear to be divided after it emerged that the tech firm already has everything planned, according to Bloomberg.

This information indicates that the platform will have four minutes of ads for every hour of content, which would be below the competitors who bet on the advertising strategy. This new subscription may also be launched at the end of this year with a pilot project.

The most innovative, within these changes, would be in price. In the middle is the subscription option with the new model it will cost between $7 and $9 per month, about half of the most popular current plan, which costs users $15.49 per month.

post ads for halving the price will help the churn rate of the platform, for some analysts. But there is no consensus. How much will this cost the company? Retention will be better at different price points, but many people who were willing to pay $15.49 a month will also be thrown off the boat by having to watch ads. This is why Wall Street is divided.

Macquarie Research Analyst, Tim Nolan, sees potential benefits from an ad-free approach. In an analyst note, he estimated that Netflix could generate up to $3.6 billion in ad sales in the United States and Canada by 2025.

“The the trick for Netflix will be to incentivize enough viewers to choose the platform with advertising through the new price to generate the large audiences advertisers want, while ensuring that the ad revenue it generates more than offsets revenue from non-ad subscribers,” Nolen wrote.

“We believe that if Netflix gets the balance rightthe company can enjoy [ingresos medios por usuario] higher in ad subscriptions, which will generate higher revenue overall,” adds the expert.

The analyzer however Bank of America, Nat Schindler, he’s not that excited. A recent report stated that “any potential profit realized from the company’s advertising initiatives remains at least several quarters down the road.” According to him, this would be nothing more than fireworks by the company to try to stop its valuation in bleeding markets, as its shares have lost more than 61% so far this year.

“It’s Netflix a premium service that will offer the same level with a system that includes ads, but at a lower cost to the consumer, which means you have to make up for the loss of subscription income before you get additional income from advertising,” he analyzed. “If the company starts with a relatively low ad load, it will incentivize people to switch, further reducing secondary revenue,” he says.

Netflix had long resisted the siren song of marketing letters which delayed their programming. Now he is simply following in the footsteps of many of his rivals in the United States. The question is whether that will be enough for it to continue to dominate the streaming space.

Growth hasn’t just stopped along the way: it’s moved backwards. Netflix needs a new engine, and advertising is an additional revenue stream that also allows you to gracefully lower average prices subscribers without an actual price reduction. The big lead that Netflix had over other streaming media stocks is gone, but investors should know that if they follow in everyone else’s footsteps, they won’t win it back. The market always dictates the verdict.

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