Streaming giant Netflix partners with Microsoft for a cheaper subscription for consumers with ads
Netflix is partnering with Microsoft for its cheaper consumer plan, which will include advertising for the first time.
Microsoft confirmed the cooperation agreementand said it was “elated to be named Netflix’s technology and sales partner to enable their first ad-supported subscription offering.”
It comes after Netflix revealed in April that it experienced a major drop in subscribers for the first quarter in a decade (200,000 people left the platform) and cut hundreds of jobs in the first quarter.
And to make matters worse, Netflix also warned shareholders that an additional two million subscribers would be leaving in the three months to July.
The streaming giant also said in April that it would introduce a new, cheaper, ad-supported subscription plan for consumers, in addition to its existing ad-free basic, standard and premium plans.
The streaming giant is therefore struggling with a decline in subscribers, as well as increased streaming competition from the likes of Disney, Apple, Amazon and HBO, which it says is affecting its outlook.
This meant Netflix struggled to maintain the growth rate it had seen during the pandemic. Netflix added 18.2 million subscribers in 2021, about half the number that signed up in 2020.
In January, Netflix said it had expanded its global customer base to a total of 222 million subscribers by 2021.
On Wednesday Netflix COO Greg Peters said: he was “glad to announce that we have chosen Microsoft as our global advertising technology and sales partner.”
“Microsoft has the proven ability to support all of our advertising needs as we work together to build a new ad-supported offering,” said Peters. “More importantly, Microsoft provided the flexibility to innovate over time on both the technology and sales sides, as well as strong privacy protections for our members.”
“It’s still very early and we still have a lot to go through,” added Peters. “But our long-term goal is clear. More choice for consumers and a premium, better than linear TV brand experience for advertisers. We are excited to partner with Microsoft to bring this new service to life.”
Microsoft’s Mikhail Parakhin, president of web experiences, said all ads that appear on Netflix will be available exclusively through the Microsoft platform.
“This is a big day for Netflix and Microsoft,” says Parakhin. “We’re excited to bring new premium value to our ecosystem of marketers and partners, while helping Netflix bring more choice to their customers.”
The development with Microsoft is interesting as Netflix runs its streaming service on AWS.
Netflix had completed its cloud migration to Amazon Web Services (AWS) in January 2016 and closed its last remaining data center.
There’s no word at this point on how much Netflix’s new, ad-supported subscription plan will be.
There is little doubt that Netflix wants to maintain and grow its revenue streams, and is focused on cost.
The arrival of an ad-supported subscription is part of that process.
In March, Netflix raised prices in select countries, including the UK and Ireland, for the second time in less than 18 months.
Another cost-saving exercise is to prevent users from sharing their passwords with family and friends.
In March last year, Netflix warned that it was testing account passwords as it attempted to address the revenue loss problem of password sharing.
In March 2022, Netflix began testing new tools to crack down on password sharing between people who don’t live in the same household.
The streaming giant began testing the performance in three countries, namely Chile, Costa Rica and Peru.
It is also certain it will expand the scheme, after it said: “Another focus is how best to monetize sharing – the 100M+ households using another household’s account. This is a great opportunity as these households are already Watch Netflix and enjoy our service.”