What happened
On a mixed day for the stock market, with the Nasdaq up but the Dow down in midmorning trading, Netflix (NFLX 1.74%) is doing its best to turn things around, and is heading higher -- up a respectable 4.4% as of 10:20 a.m. ET.
And streaming is the reason.
NASDAQ: NFLX
Key Data Points
So what
Not just any old streaming, either. Netflix stock popped today specifically because its prospects of making a "go" of its planned new ad-supported streaming business got a boost today, when Netflix reportedly poached two top executives from social media star Snap (SNAP +3.62%). As The Wall Street Journal reports, Netflix has snapped up both Snap's chief business officer, Jeremi Gorman, and its vice president of sales for the Americas, Peter Naylor. Beginning next month, Gorman will serve as Netflix's president of worldwide advertising, while Naylor will become vice president of ad sales.
WSJ notes that both execs are "well regarded among advertisers and ad buyers," which could give Netflix a leg up as it works to attract ad business for its shows. The company now also has an "experienced sales leader" in Gorman to help get the new business model off to a running start when it launches early next year.
Now what
That will be crucial for Netflix if it doesn't want to see its profitability collapse when the ad-supported tier starts up. Netflix has denied reports (from Bloomberg News) that it plans to price ad-supported subscription plans as low as $7 per month. It has not said how much it will charge, and really only ended up denying that "decisions have been made" -- which means pricing might still end up in the $7 ballpark.
On the one hand, a $7 price point holds the potential to reverse Netflix's recent trend of declining subscriber numbers. On the other hand, if Netflix does charge $7, then each Netflix user who switches from a basic $10-a-month plan to a $7 ad-supported plan is going to inflict a 30% revenue hit on Netflix -- money the company must make up with ad revenue if it doesn't want to see both revenue and profitability fall.
These two new execs now have their marching orders: Make sure that doesn't happen.
