Netflix has named Microsoft as its technology and sales partner for its planned advertising-supported subscription offering, as it prepares to launch a cheaper tier to tackle falling subscriber numbers.
The streamer announced in April that it planned to launch a new lower-priced ad-supported subscription plan, in addition to its existing ads-free basic, standard and premium plans.
News of the ad-supported service emerged as Netflix announced its first subscriber loss in more than a decade, and warned that it could lose as many as two million subscribers in the second quarter. Netflix blamed increased competition from rival streamers, account sharing, and continued economic disruption caused by the pandemic.
Greg Peters, Netflix’s chief operating officer and chief product officer, said that it had selected Microsoft as it “offered the flexibility to innovate over time on both the technology and sales side, as well as strong privacy protections for our members.”
Peters added: “It’s very early days and we have much to work through. But our long term goal is clear. More choice for consumers and a premium, better-than-linear TV brand experience for advertisers.”
Netflix joins a number of its rivals in offering ad-supported services, including Hulu, Peacock and HBO Max. Disney also plans to introduce a version of Disney+ with advertising.
Netflix is reportedly trying to renegotiate the deals it has with major entertainment firms so that it can show adverts as part of its service. The firm has held discussions with Warner Bros., Universal and Sony Pictures Television, according to the Wall Street Journal.
The partnership announcement with Microsoft comes ahead of Netflix’s second-quarter earnings report on July 19.
Last month, analysts Comscore reported that ad-supported streaming services are seeing adoption at a faster rate than subscription-based services. It said there had been a 29% increase in US households streaming AVoDs in 2022 compared to 2020 versus a 21% increase during the same period for SVoDs.
“While both ad-supported and subscription-based streaming services are growing in the US, we’re seeing that consumers are being more mindful of their budgets and leaning towards ad-supported services,” said James Muldrow, vice president, product management at Comscore. “This makes sense as inflation continues to hit consumer’s wallets.”
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