Netflix Stock Up 42% YTD – Will Free Subscription Tier Be The Next Catalyst?

Netflix stock price (NASDAQ: NFLX), has been on quite the rally in 2024. Gaining 42% on a YTD basis, and more than 250% in 2 years highlights the shift in sentiment behind the streaming giant. The advent of an ad tier, and growing subscriptions have put pressure on competitors, and built a wave of market support. So where is the next layer of growth coming from?

The global streaming giant, is reportedly considering a strategic move to introduce a free subscription model supported by advertising. This potential pivot aims to enhance their position in the advertising sales market, diversifying revenue amidst a fiercer competitive landscape.

A free subscription offering could significantly expand Netflix's user base. While Netflix already provides subscription options that include advertising, the adoption rate has remained limited. By removing the subscription fee and integrating ads, Netflix can attract a wider audience, which in turn could appeal to more advertisers seeking to capitalise on the streaming service's extensive reach.

Pricing revisions may also play a role in Netflix's consideration to launch a free tier. In recent years, Netflix has raised the cost of its various subscription plans, with the Premium package now sitting at 20 euros ($22.99) per month. The Standard subscription follows at 15 euros ($17.99) monthly, and the Basic plan remains just below ten euros ($7.99), albeit with certain limitations in functionality and streaming quality.

The contemplation of introducing a free subscription tier comes at a time when Netflix's financial performance is under scrutiny. Netflix shares have undergone a steady turnaround in the days since mid 2022, but the need for Netflix to innovate its business model and revenue streams continues.

If Netflix proceeds with the free subscription initiative, it could represent a major shift in the streaming industry, potentially influencing competitors and reshaping consumer expectations. This move also underscores the industry's trend toward ad-supported models as a viable approach to monetising content without solely relying on subscriber fees.

Netflix is at a crossroads, exploring new methods to attract and retain users in an era marked by intense competition and evolving viewer habits. The introduction of a free, ad-supported subscription tier could be a game-changing strategy, allowing the company to leverage a larger viewer base for advertising while offering consumers cost-free access to its extensive library of content. Only time will tell if this consideration becomes a reality and how it will impact the streaming landscape.