As Netflix hopes to launch an ad supported subscription layer for its streaming TV service, the company is working with Microsoft as its technology and sales partner.
The two companies announced the deal on Wednesday. Mikhailparakhin, President of Microsoft Web experience, said in a blog post that Redmond, Washington, a New York based technology giant “is happy to provide new high-quality value to our marketer and partner ecosystem, while helping Netflix provide more choices for its customers.”
Netflix, the birthplace of popular shows such as “strange things”, first announced in April that it was considering a low-cost subscription plan supported by advertising. Streamer admitted that it had lost 200000 users in the first three months of 2022 and was looking for ways to attract customers back through pricing options.
Reed Hastings, CEO of Netflix, has long said that advertisements will never appear on Netflix. His tune changed in April.
“Those who follow Netflix know that I have always opposed the complexity of advertising and I like the simplicity of subscription very much,” Hastings said at the Netflix earnings conference earlier. “Although I am a fan of this aspect, I prefer the choice of consumers. It is very meaningful to let those consumers who want lower prices and tolerant advertising get what they want.”
Gregpeters, chief operating officer of Netflix, said on Wednesday that Microsoft had proved its ability to support Netflix’s advertising needs.
“More importantly, Microsoft provides long-term innovation flexibility in technology and sales, and provides strong privacy protection for our members,” Peters said. “It’s too early. We still have a lot of work to do. But our long-term goal is clear: to provide more choices for consumers and better quality experience for advertisers than linear TV brands.”
The plan with advertising will be in addition to the existing advertising free basic, standard and premium plans.
CNBC reported that Netflix has been interviewing potential partners, including Google and Comcast, for several months to prepare for the launch of tier by the end of the year. Unlike Google, which owns youtube, and Comcast, which owns nbcuniversal’s peacock, Microsoft does not have a streaming service that competes with Netflix.
CNBC also called this new business the “Gospel” of Microsoft’s advertising department, which accounts for 6% of the company’s total revenue.
The Wall Street Journal reported on Tuesday that Netflix is seeking to revise its program agreements with major entertainment studios to allow it to place content on the advertising supported version of the service.
Some entertainment executives told the Wall Street Journal that studios may seek a 15% to 30% premium over existing contracts to grant Netflix the right to place its content on advertising support platforms.