Netflix’s ad-supported tier moves closer by partnering with Microsoft

Netflix has announced that it will partner with Microsoft as it prepares to launch an ad-supported subscription tier on its platform.

The streaming giant has spent the past three months ramping up its plan to add a cheaper, ad-supported subscription tier, and has met with companies like Google, Roku and Universal’s parent Comcast as part of of its search for a partner in this process. . Now it’s settled on Microsoft.

Announce the move (opens in a new tab)Microsoft described itself as “Netflix’s technology and business partner” and revealed that “marketers who turn to Microsoft for their advertising needs will have access to Netflix’s audience and premium smart TV inventory. All advertisements shown on Netflix will be exclusively available through the Microsoft Platform.”

Netflix Chief Operating Officer Greg Peters said, “Microsoft has the proven ability to meet all of our advertising needs as we build a new ad-supported offering together. Most importantly, Microsoft has provided the flexibility to innovate over time, both on the technology and sales side, as well as strong privacy protections for our members.”

Still no release date

The announcement didn’t specify a date when the new tier could launch, or even set an ambition, Peters adding “It’s very early days and we have a lot to do. But our long-term goal is clear: more choice for consumers and a better-than-linear premium TV brand experience for advertisers.We are excited to work with Microsoft to bring this new service to life.

The process of launching an ad-supported tier for Netflix was carried out at lightning speed. In early March, the streamer’s CFO, Spencer Neumann, was asked about the prospect of an ad-supported tier, and he went so far as to say he could “never say never”, before adding quickly that it was “not something in [the brand’s] plans right now.”

Cut at the end of June, and Netflix co-CEO Ted Sarandos confirmed an ad-supported tier was coming and explained that the streaming giant needed to tap into a new range of customers, adding: “We We’ve left a big customer segment off the table, which is people who say, “Hey, Netflix is ​​too expensive for me and I don’t mind advertising. We are adding an advertising level, we are not adding ads to Netflix as you know today. We’re adding a level of ads for people who say “hey I want a lower price and I’ll watch the ads”.

As we said above, there’s no rollout date yet for this new subscription tier, but, if previous reports are accurate, it will be before the end of 2022.

Analysis: Why can’t Netflix create its own platform?

In other words, he has no time. Netflix needs more money and it needs it now.

In the same onstage interview in which he confirmed plans for an ad-supported tier, Sarandos confirmed that Netflix executives have ambitions to build streamers’ own platform, saying “… if it becomes so big that we want to be in control, then we could.

But developing, building, testing and deploying a bespoke advertising platform for a streaming service available in 190 countries could take years of work. Netflix doesn’t have that time.

Netflix is ​​looking to consolidate its revenue after announcing in late April that it had lost 200,000 subscribers since the start of 2022 and, as a result, saw its value plummet by more than $70 billion.

Its next update on subscriber numbers is due next week and another drop – in the range of two million – is expected. If the company’s subscriber count continues to decline, its stock price will continue to decline.

Shares of Netflix peaked at just over $700 in November 2021, but currently sit at $176.56. Anything the company can do to reverse this trend and attract new investors will be welcome – and partnering with Microsoft, a truly global proposition with an advertising platform that can integrate directly with the streaming operation from Netflix, seems like an easy win.

Now the question is how quickly the two companies can roll it out.

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