Image Source: 9to5Mac
Microsoft has been chosen as Netflix’s partner for its ad-supported service, the companies announced today.
Netflix’s chief operating officer, Greg Peters, stated in a press release that Microsoft is the proven best partner to both build our new ad-supported service, and also to stay innovative over time in both technology and sales, as well as having strong privacy protections for our members.
The company, which has been facing subscriber problems and seeing slow growth, announced that it would be rolling out an ad-supported tier in April. Netflix co-CEO Reed Hastings is opposed to adding commercials and other promotions to the platform, but he said during the company’s prerecorded earnings call that providing customers with a cheaper option “makes a lot of sense.”
The offering has a lot of profit potential for Netflix as it works to sign up more users. To lure more subscribers, Netflix has increased its investment in original content, although the percentage is yet to be known. As a result, the company raised its prices. Netflix claimed the changes were bolstering their revenue, but also partially to blame for a loss of 600,000 subscribers in the U.S. and Canada.
In preparation for launching the tier before the end of 2022, Netflix has been interviewing potential partners in the past few months, including Google and Comcast.
Netflix doesn’t operate a competing streaming service to Google’s YouTube or Comcast’s Peacock, which is owned by NBCUniversal.
A lot of work needs to be done on the ad campaign, Peters said.
Tuesday, Netflix is slated to release quarterly earnings. The company had previously warned that it could lose 2 million subscribers during the second quarter. Netflix’s shares have dropped more than 70% so far this year. After June inflation data came in higher than expected, the company’s stock rose more than 1.5% in Wednesday trading.
This is good news for Microsoft’s advertising division, which contributes 6% of the company’s total revenue.
The Bing search engine is a bit less popular than Google, and Microsoft left the market for ads that appear in search results, as Aol began operating in that market.