Now playing
04:55
Life beyond Netflix: What you should know about the new wave in streaming
PHOTO: Disney+
Now playing
01:17
'The LEGO Star Wars Holiday Special' reimagines fan favorites as toys
Paul Bettany is Vision and Elizabeth Olsen is Wanda Maximoff in Marvel Studios
Paul Bettany is Vision and Elizabeth Olsen is Wanda Maximoff in Marvel Studios' WANDAVISION, exclusively on Disney+.
PHOTO: Marvel Studios/Marvel Studios
Now playing
01:07
See the Marvel 'WandaVision' series trailer
PHOTO: From Walt Disney Studios/Disney+/YouTube
Now playing
01:01
'Hamilton' movie trailer released ahead of Disney+ premiere
BURBANK, CALIFORNIA - OCTOBER 29: Robert Greenblatt, Chairman of WarnerMedia Entertainment & Direct-To-Consumer, speaks onstage at HBO Max WarnerMedia Investor Day Presentation at Warner Bros. Studios on October 29, 2019 in Burbank, California. (Photo by Presley Ann/Getty Images for WarnerMedia)
BURBANK, CALIFORNIA - OCTOBER 29: Robert Greenblatt, Chairman of WarnerMedia Entertainment & Direct-To-Consumer, speaks onstage at HBO Max WarnerMedia Investor Day Presentation at Warner Bros. Studios on October 29, 2019 in Burbank, California. (Photo by Presley Ann/Getty Images for WarnerMedia)
PHOTO: Presley Ann/Getty Images for WarnerMedia
Now playing
03:30
HBO Max is here. Its boss explains why it's worth the price
PHOTO: Ivan Marc/Shutterstock
Now playing
03:01
Disney is investing big in streaming. Here's why
Now playing
04:55
Life beyond Netflix: What you should know about the new wave in streaming
BURBANK, CALIFORNIA - OCTOBER 29: Robert Greenblatt, Chairman of WarnerMedia Entertainment & Direct-To-Consumer, speaks onstage at HBO Max WarnerMedia Investor Day Presentation at Warner Bros. Studios on October 29, 2019 in Burbank, California. (Photo by Presley Ann/Getty Images for WarnerMedia)
BURBANK, CALIFORNIA - OCTOBER 29: Robert Greenblatt, Chairman of WarnerMedia Entertainment & Direct-To-Consumer, speaks onstage at HBO Max WarnerMedia Investor Day Presentation at Warner Bros. Studios on October 29, 2019 in Burbank, California. (Photo by Presley Ann/Getty Images for WarnerMedia)
PHOTO: Presley Ann/Getty Images for WarnerMedia
Now playing
02:15
Here's a first look at the new HBO Max
PHOTO: John General
Now playing
03:17
Why Amazon Prime Video isn't Netflix
PHOTO: CNN
Now playing
02:05
Disney CEO Bob Iger maps out his strategy for streaming
PHOTO: Photo Illustration/CNN
Now playing
02:00
Disney+ will lure millennial subscribers with nostalgia
Apple CEO Tim Cook introduces Apple tv+ during a launch event at Apple headquarters on March 25, 2019, in Cupertino, California. (Photo by NOAH BERGER / AFP)        (Photo credit should read NOAH BERGER/AFP/Getty Images)
Apple CEO Tim Cook introduces Apple tv+ during a launch event at Apple headquarters on March 25, 2019, in Cupertino, California. (Photo by NOAH BERGER / AFP) (Photo credit should read NOAH BERGER/AFP/Getty Images)
PHOTO: NOAH BERGER/AFP/AFP/Getty Images
Now playing
02:54
Apple TV+ gets star-studded intro
CUPERTINO, CA - MARCH 25: Peter Stern, vice president of Services at Apple Inc., speaks during a company product launch event at the Steve Jobs Theater at Apple Park on March 25, 2019 in Cupertino, California. Apple announced the launch of it
CUPERTINO, CA - MARCH 25: Peter Stern, vice president of Services at Apple Inc., speaks during a company product launch event at the Steve Jobs Theater at Apple Park on March 25, 2019 in Cupertino, California. Apple announced the launch of it's new video streaming service, unveiled a premium subscription tier to its News app, and announced it would release its own credit card, called Apple Card. (Photo by Michael Short/Getty Images)
PHOTO: Michael Short/Getty Images
Now playing
02:03
Apple introduces new TV Channels storefront
PHOTO: Yong Xiong
Now playing
02:48
This inventor of 'useless things' has 2 million fans
PHOTO: Getty Images
Now playing
02:26
Snapchat bets on new shows to win users back
Now playing
04:06
The Marvel model for success
(CNN Business) —  

Netflix executives have repeatedly said the company will not run ads to generate more revenue. But with competition getting more intense, one Wall Street analyst thinks Netflix should offer a cheaper ad-supported service.

Shares of Netflix (NFLX) fell more than 2% Tuesday after Needham analyst Laura Martin downgraded the stock to an “underperform” — essentially a “sell” rating.

Martin said that if Netflix keeps its prices where they are currently — in a range of $9 to $16 a month — the company will lose 4 million subscribers in the United States next year.

Her solution: Offer an option that costs only about $5 to $7 a month and features an advertising block of about six to eight minutes an hour.

Martin argues such a service could help fend off existing competition from Disney+, Amazon Prime TV, Apple+, Hulu and CBS All Access and new threats from AT&T’s HBO Max and Comcast’s Peacock, which will launch in 2020. (AT&T also owns CNN.)

Those competitors are already charging much lower prices for their streaming plans, between $5 and $7. Granted, most of them don’t have content libraries as vast as Netflix’s, but the challengers have some buzzy shows of their own.

Disney (DIS), for example, has the Star Wars show “The Mandalorian,” which has become a pop cultural phenomenon thanks to its “Baby Yoda” character. Disney (DIS) charges just $6.99 a month for Disney (DIS)+ and also has a free one-year offer for many Verizon customers.

Apple (AAPL) just received three Golden Globe nominations for its original program “The Morning Show.” (CNN’s Brian Stelter is a consultant on the show, which is based on his book.) Apple (AAPL) TV+ costs only $4.99 a month.

Increased competition

Netflix was not immediately available for comment when asked whether it would consider Martin’s idea of creating a cheaper tier with ads.

But its executives have taken great pains in the past to point out that because Netflix has no ads, its service has fewer privacy concerns than Facebook (FB), Google’s (GOOGL) YouTube and other ad-supported online media firms contend with.

Netflix CEO Reed Hastings, content chief Ted Sarandos and other top executives continue to argue that the service is worth the premium price given popular original shows like “Stranger Things,” “The Crown” and “Dark” as well as movies such as “The Irishman” and “Marriage Story.”

Still, Martin said in her report Tuesday she’s worried Netflix could lose international subscribers once Disney and other media companies launch global versions of their streaming services.

“We believe Netflix must add a second, lowe- priced service,” she said in the report. “Netflix’s premium price tier of $9 to $16 a month is unsustainable.”

Martin also noted that Netflix stands to lose a lot of popular content to its rivals. “Friends” moves to HBO Max next year, and Peacock will be home to “The Office” starting in 2021. Much of Disney’s own branded movies and shows —- as well as content from Marvel, Pixar and Star Wars — are in the process of moving to Disney+.

Investors are starting to worry, too. Although Netflix’s stock is still up 11% this year, shares are more than 20% below their 52-week high.

Netflix is also the worst performer of the so-called FAANG stocks — Facebook, Apple, Amazon (AMZN), Netflix and Google owner Alphabet — this year. Disney’s stock has trounced Netflix too. The House of Mouse has surged 33% in 2019.