Here’s why Netflix stock climbed higher today

Investors jumped on the news that Netflix could introduce an ad-supported tier sooner than expected.

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This article was originally published on All figures quoted in US dollars unless otherwise stated.

What happened 

Shares of Netflix (NASDAQ: NFLX) were rising this afternoon after The New York Times reported that the company could launch an ad-supported video streaming tier earlier than Netflix's management previously said.  

The video streaming stock was up by more than 5% today and had gained 2.8% at the end of the trading day. 

So what

According to The New York Times, Netflix told employees that it could launch its ad-supported, lower-priced tier in the last calendar quarter of this year. If true, that would be significantly faster than management's earlier timeline of one to two years. 

Additionally, Netflix said in the note that it's going to start cracking down on password sharing by the end of this year as well, by charging a fee to users who do so. 

The two moves come after Netflix lost 200,000 subscribers in its first quarter, which was the company's first subscriber loss in 10 years. 

In the past, Netflix had always been against a lower-priced tier supported by advertising. But Netflix's co-founder and co-CEO Reed Hastings said on the first-quarter call that while he's always been a big fan of the subscription video streaming model, Netflix is considering an ad-supported tier because he's a "bigger fan of consumer choice." 

Now what 

As of this writing, Netflix hasn't officially announced an ad-supported tier, but investors are nonetheless happy to see that the company appears to be moving quickly in this direction. 

With subscriber growth slowing and Netflix's share price down 64% over the past 12 months, investors are looking for any changes at the company that could help boost revenue and get more people signed onto the company's video streaming service. 

This article was originally published on All figures quoted in US dollars unless otherwise stated.

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Netflix. The Motley Fool Australia has recommended Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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