Netflix partners Microsoft for ad-supported plan to drive subscription

BY Grace Airhule.

Streaming giant Netflix is partnering with Microsoft for its first-ever ad-supported subscription plan in an effort to reverse a drop in subscribers.

The companies announced the partnership on Wednesday, but did not say when the ad-supported subscription plan would begin.

Netflix lost more than 200,000 subscribers in the first three months of 2022, falling extremely short of its target for the first quarter, and its shares have cratered about 70 percent since the start of the year. It was the first time the platform lost subscribers rather than gained in over a decade.

The company also forecast its subscribers would fall by another 2 million in the current quarter to about 219.6 million after the first quarter decline.

Though initially opposed to the idea of running ads on its service, Netflix has decided to incorporate them into a separate subscription offering.

Announcing the partnership, Greg Peters, Netflix COO, said although it is still in the early stages, Microsoft had proven its ability to support all its advertising needs.

“In April we announced that we will introduce a new lower-priced ad-supported subscription plan for consumers, in addition to our existing ads-free basic, standard, and premium plans. Today we are pleased to announce that we have selected Microsoft as our global advertising technology and sales partner,” Peters said.

“Microsoft has the proven ability to support all our advertising needs as we together build a new ad-supported offering. More importantly, Microsoft offered the flexibility to innovate over time both on the technology and sales side, as well as strong privacy protections for our members worldwide,” he said.

He said the long-term goal is to create more choice for consumers “and a premium, better-than-linear TV brand experience for advertisers”, adding, “We’re excited to work with Microsoft as we bring this new service to life.”

Mikhail Parakhin, president of Web Experiences at Microsoft, said the company was thrilled to partner with Netflix and offer new premium value to its ecosystem of marketers and partners.

“At launch, consumers will have more options to access Netflix’s award-winning content. Marketers looking to Microsoft for their advertising needs will have access to the Netflix audience and premium connected TV inventory. All ads served on Netflix will be exclusively available through the Microsoft platform. Today’s announcement also endorses Microsoft’s approach to privacy, which is built on protecting customers’ information,” Parakhin said.

“This is a big day for Netflix and Microsoft. We’re excited to offer new premium value to our ecosystem of marketers and partners while helping Netflix deliver more choice to their customers,” he said.

Prior to the announcement, Netflix had been interviewing potential partners for the last few months, including Google and Comcast, in view of its plans to launch the new tier before the end of the year.