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Netflix Stock Moves Higher On Reported Talks to Develop Ad-Based Business Model

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Netflix  (NFLX) – Get Netflix Inc. Report shares moved higher Thursday following a report that it’s started talks with potential partners for an ad-supported addition to its online streaming service.

The Wall Street Journal reported from the Cannes Lions conference in France that co-CEO Ted Sarandos said he wants and ad-supported version of Netflix to be ““more integrated and less interruptive” than traditional television advertising. Sarandos noted the first steps would be focused on an “easy entry to the market” that the group would then build-on and improve.

“What we do at first will not be representative of what the product will be ultimately,” he told the Journal. “I want our product to be better than TV.”

Netflix lost 200,000 subscribers over the the first three months of the year and expects to lose another 2 million by the end of the second quarter, thanks to what the company said was a mix of rising prices, increasing competition and password sharing, which Netflix estimated at around 100 million households world wide.

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The numbers prompted talk of a pivot towards an ad-based model in order to offset slumping revenue growth.

“One way to increase the price spread is advertising on low-end plans and to have lower prices with advertising. And those who have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription,” CEO Reed Hastings told investors on a conference call in late April.

“But as much I’m a fan of that, I’m a bigger fan of consumer choice. And allowing consumers who would like to have a lower price and are advertising-tolerant get what they want makes a lot of sense.”

Netflix shares were marked 1.15% higher in pre-market trading following the Journal report to indicate an opening bell price of $181.45 each.