Netflix Partners Microsoft For Cheaper Subscription Plan…With Adverts

Netflix is to partner with Microsoft for its cheaper consumer subscription plan, that will for the first time feature advertising.

Microsoft confirmed the partnership deal, saying it was “thrilled to be named Netflix’s technology and sales partner to help power their first ad-supported subscription offering.”

It comes after Netflix in April revealed that in the first time in ten years, it experienced a big fall in subscribers (200,000 people left the platform) during its first quarter, and it cut hundreds of jobs.

Increased competition

And to make matters worse, Netflix also warned shareholders another two million subscribers were likely to leave in the three months to July.

The streaming giant also said in April it would introduce a new lower priced ad-supported subscription plan for consumers, in addition to its existing ads-free basic, standard and premium plans.

The streaming giant is thus contending with a decline in subscribers, as well as increased streaming competition from the likes of Disney, Apple, Amazon and HBO, which it said is affecting its prospects.

This meant Netflix struggled to maintain the pace of growth it had seen during the pandemic. Netflix added 18.2 million subscribers in 2021, about half the number who signed up in 2020.

In January Netflix said it had grown its global customer base to a total of 222 million subscribers during 2021.

Microsoft partnership

On Wednesday Netflix COO Greg Peters said he was “pleased to announce that we have selected Microsoft as our global advertising technology and sales partner.”

“Microsoft has the proven ability to support all our advertising needs as we work together to build a new ad-supported offering,” said Peters. “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.”

“It’s very early days and we have much to work through,” Peters added. “But our long term goal is clear. More choice for consumers and a premium, better-than-linear TV brand experience for advertisers. We’re excited to work with Microsoft as we bring this new service to life.”

Microsoft’s Mikhail Parakhin, president web experiences, said all ads served on Netflix will be exclusively available through the Microsoft platform.

“This is a big day for Netflix and Microsoft,” said Parakhin. “We’re excited to offer new premium value to our ecosystem of marketers and partners while helping Netflix deliver more choice to their customers.”

The development with Microsoft is interesting considering that Netflix runs its streaming service on AWS.

Netflix by January 2016 had completed its cloud migration to Amazon Web Services (AWS), and had shut down its last remaining data centre.

There is no word at present on how much the new, advert-supported subscription plan from Netflix will be.

Cost savings

There is little doubt that Netflix is seeking to maintain and grow its revenue streams, and is focused on costs.

The arrival of an advert-supported subscription plan is part of that process.

In March Netflix had raised prices in certain countries, including the UK and Ireland, for the second time in less than 18 months.

Another cost cutting exercise is stopping users sharing their passwords with family and friends.

In March last year Netflix warned it was testing account passwords, as it sought to clampdown on the revenue losing problem of password sharing.

Then in March 2022, Netflix began testing new tools to crackdown on password sharing between people who don’t live in the same household.

The streaming giant began testing the crackdown in three countries, namely Chile, Costa Rica and Peru.

It is also certain to expand the scheme, after it said “another focus is how best to monetise sharing – the 100M+ households using another household’s account. This is a big opportunity as these households are already watching Netflix and enjoying our service.”