Netflix partners with Microsoft on ad-supported subscription plan

Netflix has named Microsoft as its partner for its ad-supported service, the companies announced Wednesday.

“Microsoft has the proven ability to support all our needs as we together 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,” Netflix COO Greg Peters said in a statement.

The “Stranger Things” streamer, which has been struggling to retain and add subscribers, announced in April that it was planning on rolling out an ad-supported tier after years of resisting the move.

Co-CEO Reed Hastings has long been opposed to adding commercials or other promotions to the platform but said during the company’s prerecorded earnings conference call that it “makes a lot of sense” to offer customers a cheaper option.

The offering has a lot of profit potential for Netflix as it works to sign up more users. In an effort to lure more subscribers, Netflix has increased its content spend, particularly on originals. To pay for it, the company hiked prices of its service. Netflix said those price changes are helping to bolster revenue but were partially responsible for a loss of 600,000 subscribers in the U.S. and Canada during the most recent quarter.

Netflix has been interviewing potential partners for the past several months, including Google and Comcast, as it prepares to launch the tier before the end of 2022. 

Unlike Google, which owns YouTube, and Comcast, which owns NBCUniversal’s Peacock, Microsoft doesn’t operate a competing streaming service to Netflix (NBCUniversal is the parent company of NBC News).

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Peters said the ad-efforts are still in the “very early days,” with “much to work through.”

For Subscribers

FOR SUBSCRIBERSCBP leaders cut out of Trump ad buy decision

FOR SUBSCRIBERSAmerican passenger drafted goodbye texts to her family as Flydubai plane plummeted

FOR SUBSCRIBERSCornell rape allegation pushes embattled New York prosecutor into national spotlight

FOR SUBSCRIBERSAbdul El-Sayed tries to woo MAHA voters as Democrats seek inroads with RFK’s supporters

FOR SUBSCRIBERSKratom-like substances are popping up in a typically benign supplement

FOR SUBSCRIBERSGOP super PAC increases its spending for Sen. Jon Husted in tough Ohio race

FOR SUBSCRIBERSRecords reveal tumultuous marriage between slain New York Times executive and wife

FOR SUBSCRIBERSFrom clean energy warrior to ‘wall of shame,’ James Talarico reverses on a fossil fuel money pledge

FOR SUBSCRIBERSCongressional staff planned official trip with luxury stops in Italy and France weeks before election

FOR SUBSCRIBERSA harrowing ordeal aboard an Israel-bound plane

FOR SUBSCRIBERSOpenAI CEO Sam Altman to skip congressional hearing on rogue AI agents

FOR SUBSCRIBERSKey DOJ lawyers departed Trump ‘grand conspiracy’ probe amid pressure to produce, source says

FOR SUBSCRIBERSTrump’s new AI chatbot often links to a site launched under Clinton 26 years ago

FOR SUBSCRIBERSAt MAHA summit, industry CEOs the movement once vilified take the stage

FOR SUBSCRIBERSThis Paralympian has two goals: Win medals and give away $500,000 to her teammates

Netflix is slated to release quarterly earnings Tuesday. It had previously warned it could lose 2 million subscribers during the second quarter. Netflix shares have dropped more than 70% year-to-date.

The new business is a boon for Microsoft’s advertising division, which contributes 6% of the software company’s total revenue.

The Bing search engine, where Microsoft picks up revenue by showing ads in search results, is not as popular as Alphabet’s Google, and in 2015 Microsoft exited the display-ad market as Aol took on that unit.