Netflix partners with Microsoft on ad-supported subscription plan

• Netflix has been struggling to maintain and increase subscribers.
• Microsoft’s advertising sector benefits greatly from the new business.
• The advertising efforts are still in their “very early stages,” with “lots to work through”.

Microsoft has been appointed as Netflix’s partner for its ad-supported service, the two firms said on Wednesday.

“As we develop a new ad supported solution together, Microsoft has the demonstrated capacity to serve all of our needs. In addition to solid privacy protections for our subscribers, Microsoft also provided the ability to innovate over time on the technological and sales sides, according to Netflix COO Greg Peters.

After years of delaying the implementation of an ad-supported tier, the “Stranger Things” streamer, which has been struggling to maintain and increase subscribers, said in April that it was preparing to do so.

Although co-CEO Reed Hastings has long opposed adding advertisements or other forms of marketing to the platform, he stated during the business’s prepared earnings conference call that providing customers with a less expensive choice “makes a lot of sense.”

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As it strives to attract more subscribers, Netflix may make a lot of money from the service. Netflix has raised its content expenditure, especially for original material, in an effort to entice additional members. The business raised the price of its service to cover the cost. Although those price increases, according to Netflix, are boosting income, they were also partially to blame for a 600,000-subscriber decline in the U.S. and Canada during the most recent quarter.

In order to debut the tier by the end of 2022, Netflix has been interviewing possible partners over the past few months, including Google and Comcast.

Microsoft doesn’t run a Netflix-rivalling streaming service, in contrast to Google, which owns YouTube, and Comcast, which owns NBCUniversal’s Peacock.

The advertising efforts, according to Peters, are still in their “very early stages,” with “lots to work through.”

Tuesday will see the release of Netflix’s quarterly report. It has earlier issued a warning that the second quarter might see a 2 million subscriber loss. Year to date, Netflix shares have decreased by more than 70%. After June inflation statistics came in stronger than anticipated on Wednesday afternoon trade, the company’s shares was up more than 1.5 percent on an otherwise down day for the markets.

Microsoft’s advertising sector, which accounts for 6% of the company’s overall income, benefits greatly from the new business.

Because Alphabet’s Google is more well-known than Microsoft’s Bing search engine, which generates revenue by displaying adverts in search results, Microsoft decided to leave the display ad market in 2015 when Aol absorbed that business.

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