Netflix stock plummets 37% as CEO says company plans ad-supported tier

Reed Hastings said in an interview that the company plans to launch a lower-priced tier with ads. As of this writing, the stock price of the company was down 37 percent.

Hastings said that an ad-supported tier is something they are trying to figure out over the next year or two, and that they are open to offering even lower prices with advertising as a consumer choice.

Hastings said that he was against the complexity of advertising and a big fan of the simplicity of subscription.

When asked if there would be a test of an ad-supported plan in small markets before a global launch, Hastings said it would not be necessary. Disney is doing it, while HBO is doing it. I don't think we have a lot of doubt that it works. All those companies have figured it out. I am sure we will just get in and figure it out, not test it or not do it.

If you still want the ad-free option, it would be a plan layer like it is at Hulu, so you can have that as a consumer. Hastings said that if you would rather pay a lower price, we would cater to you as well. The US price for the service is between $9.99 and $19.99 a month.

Netflix also fights password-sharing

In order to fight password-sharing, the company will charge an extra fee of $3 to users who share accounts with people in other households.

In its letter to shareholders Tuesday, the company said that it is being shared with over 100 million additional households. The letter said that the company is planning more effective monetization of multi-household sharing.

Account sharing as a percentage of our paying membership hasn't changed much over the years, but it's becoming a bigger focus for the company as it struggles to grow its subscriber base.

We're working on how to monetize sharing. We've been thinking about that for a couple of years, but when we were growing fast, it wasn't a high priority to work on, and now we're working super hard on it. Remember, these are over 100 million households that already are choosing to view Netflix. They love the service; we've just got to get paid at some degree for them.