Netflix (NASDAQ:NFLX)
Netflix (NASDAQ:NFLX) is performing well today, up a nice 4.4% as of 10:20 a.m. ET despite the market being split thus far (the Nasdaq is up, but the Dow is down).
One explanation is the rise of streaming services.
What’s the Story?
Additionally, this isn’t your average streaming service. The news that Netflix (NASDAQ:NFLX) has reportedly hired away two top executives from social media star Snap (SNAP 8.19%) has caused the stock to rise today in the hopes that Netflix (NASDAQ:NFLX) would be able to successfully launch its new ad-supported streaming business. According to The Wall Street Journal, Netflix (NASDAQ:NFLX) has hired Jeremi Gorman, Snap’s chief business officer, and Peter Naylor, the company’s vice president of sales for the Americas. Gorman will take over as president of worldwide advertising at Netflix (NASDAQ:NFLX) next month, while Naylor will move up to vice president of ad sales.
According to WSJ, both executives are “highly regarded among marketers and ad buyers,” which might help Netflix (NASDAQ:NFLX) in its quest to get commercial support for its programming. In Gorman, the company has gained an “experienced sales leader” who will be instrumental in successfully implementing the new business model in the first quarter of 2019.
What’s Next?
That is essential if Netflix (NASDAQ:NFLX) is to avoid a precipitous drop in profitability upon the introduction of the ad-supported tier. Bloomberg News reported that Netflix planned to provide ad-supported subscriptions for as little as $7 a month; however, Netflix (NASDAQ:NFLX) has now rejected that report. It has not disclosed its pricing structure and has simply denied that “decisions have been made,” suggesting that it may still come in around $7.
With a $7 price tag, Netflix (NASDAQ:NFLX) may be able to stop its current drop in subscribers. However, if Netflix does charge $7, then the firm will lose 30% of its revenue for every subscriber who downgrades from an essential $10/month subscription to a $7 ad-supported plan, money it will need to make up with ad revenue if it doesn’t want its revenue and profitability to drop.
Featured Image – Megapixl © Natanaelginting
Author Shariq Khan 
