Microsoft will be its exclusive ad technology and sales partner.
Netflix’s Ad-Supported Tier
The streaming giant will soon introduce an ad-supported tier. And it chose Microsoft to provide the ad technology. Microsoft was not the only contender, though. Google was reportedly a top choice but, in the end, Microsoft won the contract.
Why Microsoft?
According to Netflix,
“Microsoft has the proven ability to support all our advertising needs as we work together to build a new ad-supported offering. More importantly, Microsoft offered the flexibility to innovate over time on both the technology and sales side, as well as strong privacy protections for our members.”
The ad-supported tier is still in the very early days. Netflix admitted that it has a lot of work to do before it can launch the said service.
However, in May, it told its employees that it would roll out the ad-supported tier before the end of this year. The company is also planning to charge customers an extra fee for password-sharing.
And the extra fee would roll out at the same time it would introduce the new service.
In April, the company announced that it was planning to launch a lower-priced subscription package. The package would come with ads. However, it would also continue to offer ad-free options.
Netflix’s CEO Reed Hastings used to be against advertising. He wanted a simple subscription. However, he admitted to being a fan of consumer choice and the ability of consumers to pick a lower price in exchange for ads.
Other streaming giants have already offered ads. Hulu, Disney, and HBO have ads on their streaming platforms. Netflix believes that the ad-supported package will work for the company.
Slowing Revenue
Netflix is experiencing slowing revenue growth. It has already laid off 150 employees in May. Its paid subscription has stalled. It saw its stock tumbling.
Before, Netflix spent billions of dollars on content. Recently, however, it has lost out to HBO Max and Disney+.
The company has already diversified its sources of revenue by buying three gaming studios. However, the move will not put a huge bump in the revenue anytime soon. For many, video games are just a minor feature. Many analysts considered that Netflix’s effort is just a distraction from its main business.
The main challenger of Netflix is Disney+. It launched in 2019 but it is expecting 260 million subscribers in the next two years. HBO Max, too, is seeing significant subscriber growth.
Netflix has several Academy Award nominations. When Apple’s CODA won the Best Picture Oscar, it became the first streaming company win an Academy.
Microsoft Ad Platform
Microsoft also issued an official statement about providing ads to Netflix.
“At launch, consumers will have more options to access Netflix’s award-winning content. Marketers looking to Microsoft for their advertising needs will have access to the Netflix audience and premium connected TV inventory. All ads served on Netflix will be exclusively available through the Microsoft platform. Today’s announcement also endorses Microsoft’s approach to privacy, which is built on protecting customers’ information.”
