Netflix Teams Up With Microsoft To Launch New Subscription Plans That Contain Ads

JAKARTA - Netflix Inc announced on Wednesday, July 13, that it has selected Microsoft Corp as its technology and sales partner for its ad-supported subscription offering plan. This is being done by the streaming giant to stop slowing subscriber growth by rolling out cheaper subscription plans to the market.

Netflix shares rose 2% to $178.06 on the news.

Netflix said in April that it would introduce a new, lower-priced version of the service in a bid to attract more subscribers. The announcement comes as its premium subscription service continues to experience a drastic decline in more than a decade. The decline led to deeper losses in the future.

Netflix's Chief Operating Officer, Greg Peters, said in a blog post that Netflix chose Microsoft for its ability to innovate, as well as for its strong privacy protections.

"It's still very early days and we have a lot of things to work on. But our long term goal is clear. More choice for consumers and a better than linear premium TV brand experience for advertisers," Peters said, as quoted by Reuters. Microsoft itself is expected to strengthen Netflix ad sales.

The software giant made $10 billion in advertising revenue last year, selling ads on services such as search engine Bing and the business-focused social network LinkedIn. Last month, Microsoft completed the acquisition of AT&T Inc.'s online advertising platform Xandr Inc., which will allow advertisers to buy ad space across thousands of websites and targeted audiences.

Microsoft president, Brad Smith, has served on Netflix's board since 2015.

The partnership announcement comes ahead of Netflix's second-quarter earnings report on Tuesday. The company warned investors that it could lose as many as 2 million subscribers in that period, despite the return of popular series like "Stranger Things," which broke viewership records.

Netflix joins a number of its competitors in offering ad-supported services, including Walt Disney Co's Hulu, NBCUniversal's Peacock, and HBO's Max Warner Brothers Discovery. Disney also plans to introduce a Disney+ version with ads.

Comscore Inc researchers say the ad-supported service allows for a faster rate of adoption than subscription services, as inflation has taken a toll on consumers' wallets.

"The time is ripe for traditional subscription-based streaming services such as Netflix to consider launching an ad-supported service to enhance their growth trajectory," Comscore's James Muldrow said in a statement.