Netflix’s Valuation Decimated: How it Plans to Rebound

By: James Flippin · July 14, 2022 · Reading Time: 3 minutes

Valuation Craters

Netflix (NFLX) stock is having a tough year. After its share price peaked at $691.69 on November 17, 2021, the company’s valuation has tumbled, bouncing along at levels below $200 a share since early May.

The streaming pioneer faces increasing competition. While numerous alternative platforms, big and small, have eroded its subscriber base, it still holds the top spot in terms of customers on its platform. Now, similar to entertainment giant Disney (DIS), the company is evaluating how to introduce an ad-supported tier.

A New Subscriber Avatar

The move is intended to address the leaks of its subscriber base by providing a low-cost option to price-sensitive viewers. However, the new revenue structure will require amendments to programming contracts so that the company can include content on the new ad-supported tier. This is likely to result in rising costs for the rights to stream these shows, which market observers estimate will be a markup of 15-30%. Time will tell how the seesaw effect of the strategic shift will impact the company’s bottom line.

Netflix is currently negotiating contracts with Warner Brothers Discovery (WBD), creator of You; Universal (CMCSA), which makes Russian Doll; and Sony (SONY) producer of “The Crown.”

Scant Details

The streaming giant wants to launch the new ad-supported tier by the fourth quarter of this year. It has yet to elaborate on the details, such as how the ads will be displayed, the difference in content between the commercial-free and less expensive tier, or the pricing structure.

Historically, studio executives have been dissatisfied regarding the lack of transparency Netflix has provided about viewership. The value to marketers could potentially be diminished if subscriber data remains limited.

Things are changing daily within the financial world. Sign up for the SoFi Daily Newsletter to get the latest news updates in your inbox every weekday.

Sign up

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.


TLS 1.2 Encrypted
Equal Housing Lender