Half the price, half or double the fun? From The Motley Fool

Half the price, half or double the fun? From The Motley Fool
Half the price, half or double the fun? From The Motley Fool

© Reuters. Stock: Half the Price, Half or Double the Fun?

Netflix (NASDAQ:) (NASDAQ:NFLX) stock may be poised for the biggest change in company history. The management is expected to introduce an advertising-financed subscription model later this year. At least in parts. For a discount on the monthly fee, users should be able to enjoy a certain program for a little advertising.

This is important insofar as advertising has not actually been a strategic component for long periods of time. The offering of a discount is also received in part positively, but in part with criticism.

With a look at the calendar, we are approaching the end of the year in small steps. Now the first details about this new offer have been leaked. Let’s see if Netflix will soon offer half the price and at the same time half or even double the fun?

Netflix share: Half price is fixed! As the Bloomberg news agency reports, the first very vague details have been published. Netflix’s ad-supported offering is said to have a price tag of between $7 and $9 a month. That could be anywhere from 45.2% to 61% of paid subscription compared to the standard plan, which is now $15.49. Depending on what the management decides, there is a smaller or larger discount. But roughly half the price is certain.

The other question remains, whether there is double or half the fun. In any case, there should be advertising to the extent of a few minutes per hour, which should compensate for the monetization accordingly. In principle, this could indicate that the offer is sufficient to attract some interested parties. And if only as a second offer at a reasonable price. In any case, growth seems possible if the price falls.

Nevertheless, the question is not only whether half or double the fun occurs for consumers, but also for investors. Crucially, Netflix’s management finds a middle ground. New, partly ad-financed users are a great growth story. However, this must not lead to this tariff cannibalizing the existing user base. The offer could at least be so expensive that this effect is largely prevented. The question then is whether the price reduction is sufficient for binding new members. Difficult, difficult.

Wait! In any case, based on the price, I can see a solid strategy on the part of Netflix’s management. It remains to be seen whether it will have the desired effect. In any case, growth and new subscribers would be desirable. The offer has the right trend. It remains to be seen whether it will take hold and not cannibalize the existing user base. After all, the market launch shouldn’t take much longer.

Vincent owns shares in Netflix. The Motley Fool owns shares of shares of and recommends Netflix.

Motley Fool Germany 2022

This article first appeared on The Motley Fool

The article is in German

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