Netflix partners with Microsoft on an ad-supported subscription plan

Netflix named Microsoft as its advertising service partner, the company announced on Wednesday.

“Microsoft has proven its ability to meet all of our needs as we build a new ad-supported offering together. More importantly, Microsoft offered the flexibility to innovate over time in both technology and sales, as well as strong privacy protections for our members. This was stated by Netflix COO Greg Peters.

The Stranger Things streamer, who has struggled to retain and add subscribers, announced in April that he plans to roll out an ad-supported tier after years of resistance to the move.

Co-CEO Reed Hastings has long opposed adding ads or other promotions to the platform, but said during the company’s pre-recorded conference call that it is “makes a lot of sense“to offer customers a cheaper option.

Read more: Netflix announces ‘Stranger Things’ spin-off

The offer has great profit potential for Netflix as it helps attract more users. In an effort to attract more subscribers, Netflix has increased spending on content, especially originals. To pay for this, the company raised the prices of its services. Netflix said these price changes help boost revenue but are partly responsible for the loss of 600,000 U.S. and Canadian subscribers during the pandemic. last quarter.

Netflix has been conducting interviews with potential partners over the past few months, including Google as well as Comcastas he is preparing to launch the level before the end of 2022.

Unlike Google, which owns YouTube, and Comcast, which owns NBCUniversal’s Peacock, Microsoft doesn’t operate a streaming service that competes with Netflix.

Peters said work on the ad is still “very early on” and “there’s still a lot of work to be done.”

Netflix plans to release quarterly earnings on Tuesday. The company had previously warned that it could lose 2 million subscribers in the second quarter. Netflix shares are down over 70% since the start of the year. The company’s shares rose more than 1.5% on Wednesday afternoon, while markets were otherwise down after higher-than-expected June inflation data.

The new business is a boon for Microsoft’s advertising division, which generates 6% of the software company’s total revenue.

Search engine Bing, where Microsoft earns revenue by displaying ads in search results, is not as popular as Alphabet’s Google, and in 2015 Microsoft pulled out of the display ad market when Aol took over the division.

— Sarah Whitten of CNBC, Jordan Novet and Alex Sherman contributed to this report.