As the streaming giant attempts to patch lagging subscriber growth by introducing a more affordable plan, Netflix Inc said on Wednesday that it has chosen Microsoft Corp as its technology and sales partner for its upcoming ad-supported subscription service.
In response to the news, Netflix shares increased 2% to $178.06.
In an effort to increase the number of members, Netflix announced in April that it would launch a new, more affordable version of its service. The news was made as the innovative subscription service reported its first decline in subscribers in more than ten years and forecast much worse losses.
In a blog post, Netflix’s chief operating officer Greg Peters claimed that the company selected Microsoft for its capacity to innovate and its stringent privacy policies.
“It’s still extremely early, and there are many issues to resolve. However, our long-term objective is obvious. More options for customers and superior-than-linear TV brand experiences for advertisers, according to Peters.
Netflix’s ad sales are predicted to be driven by Microsoft.
Selling advertisements on a variety of services, including its Bing search engine and its business-focused social network, LinkedIn, the software giant made $10 billion in ad income last year. At&T Inc.’s online advertising platform, Xandr Inc., which enables advertisers to purchase ad space across thousands of websites and target demographics, was acquired by Microsoft last month.
Brad Smith, the CEO of Microsoft, has been a member of the Netflix board since 2015.
Prior to Tuesday’s release of Netflix’s second quarter earnings report, a cooperation was announced. Despite the comeback of such popular series as “Stranger Things,” which broke audience records, the firm warned investors it could lose as many as 2 million members in the term.
With the addition of an ad-supported service, Netflix joins a number of its competitors, including HBO Max from Warner Brothers Discovery, Peacock from NBCUniversal, and Hulu from Walt Disney Co.
Additionally, Disney intends to launch a version of Disney+ featuring advertisements.
Such ad-supported services are being adopted more quickly than subscription services, according to research firm Comscore Inc., as customers’ wallets are being squeezed by inflation.
According to Comscore’s James Muldrow, “the moment is right for traditionally subscription-based streaming services like Netflix to consider releasing an ad-supported tier to enhance their growth trajectory.”
