The era of ad-supported streaming content is here, and Netflix (NASDAQ:NFLX) is staking its claim. In a direct salvo against rival Disney (NYSE:DIS), Netflix released the pricing details of its low-cost subscription tier, which will be supported by advertisements. There are several things that NFLX stock investors need to know about this important development.
As you can see, the streaming wars are heating up. Netflix needs to get creative if it’s going to maintain its status as the king of streaming. Thus, the company is rolling out an affordable subscription tier — but the subscriber will have to put up with ads.
This rollout may or may not live up to NFLX stock investors’ expectations. So, be sure to learn as much as you can about it — starting with the essential details we’ll cover right now.
What NFLX Stock Investors Need to Know
For one thing, investors need to know the expected launch time frame and, of course, the pricing. Reportedly, Netflix’s new ad-supported tier is expected to launch on Nov. 3 in the U.S. It will cost $6.99 per month.
This is an interesting move because, for years, Netflix resisted the idea of introducing an ad-supported pricing tier. However, Netflix’s last few earnings reports have indicated lackluster subscriber growth.
In other words, perhaps this is Netflix’s way of getting creative while also dealing with inflation. After all, consumers are spending more on necessities nowadays, so they’re probably glad to have a low-cost Netflix subscription option.
Second, NFLX stock investors need to know that Netflix’s new pricing model is undoubtedly a direct threat to Disney. Consider that the Disney+ ad-supported tier, which will launch in December, will cost $7.99 per month.
Is it a coincidence that Netflix’s new low-cost plan will cost exactly a dollar less than that? Not likely, so consider this an instance of “shots fired” directly at Disney.
Third, investors should know that Netflix’s ads will be 15 or 30 seconds in length, and there will be four to five minutes of commercials per hour, on average. Compared to network television, that’s not too bad. So, Netflix’s ads might not be too annoying. Perhaps customers will simply get used to them.
This morning, NFLX stock was slightly up as financial traders absorbed all of this information. In time, we’ll find out whether Netflix’s answer to Disney’s ad-supported upcoming subscription tier will be a winner or a dud.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
