Netflix partners with Microsoft to offer cheaper streaming plan
Netflix opted to develop the lower-cost offering after a disappointing first quarter in which it lost subscribers for the first time in a decade, and after years of resistance against the very idea of running ads.
The ad-supported subscription will be in addition to the three options already available, the cheapest being $10 per month in the United States.
Microsoft will be responsible for designing and managing the platform for advertisers who want to serve ads to Netflix users.
“It’s very early days and we have much to work through,” Greg Peters, Netflix’s chief operating officer, said in a statement.
Microsoft added that advertisers “will have access to the Netflix audience and premium connected TV inventory.” Adding advertising means Netflix will expose itself to some thorny issues, including debates around consumers’ personal data being harvested on a massive scale to target them with more lucrative, personalized pitches.
Analysts were not surprised by Netflix’s choice in Microsoft because it offers fewer conflicts of interest for Netflix than some other companies.
“Unlike the top three ad sellers in Google, Meta, and Amazon, Microsoft hasn’t pushed competing streaming products,” wrote analyst Ross Benes.
After years of amassing subscribers, Netflix lost 200,000 customers worldwide in the first quarter compared to the end of 2021. That decline has contributed to a 70 percent decline in its stock price so far this year, wiped out in about $190 billion in shareholder wealth and triggered hundreds of layoffs.
The streaming giant reacted by announcing the arrival of advertising on the service, with the aim to finance the investments necessary to maintain its position as leader in the industry that it launched.
Landing the ad deal with a video streaming service that boasts more than 220 million subscribers represents a major coup for Microsoft, which has been engaged in a long-running and often acrimonious battle for the past 20 years with Google, the dominant force in digital advertising.
“This deal gives Microsoft something its growing ad business has lacked, quality streaming video inventory that has potential to scale” said Insider Intelligence analyst Ross Benes.