Netflix Buddies Up With Microsoft to Craft Its Upcoming Ad-Based Subscription Tier

Netflix Buddies Up With Microsoft to Craft Its Upcoming Ad-Based Subscription Tier

Were you already feeling lukewarm about Netflix looking to create a cheaper ad-supported tier for subscribers? Would it make you feel better if you knew that big boy Microsoft is now going to be the one shacked up with the streaming giant?

Both companies simultaneously confirmed Wednesday that they will be working together to support the ads on Netflix. What that will look like is… well nobody’s anywhere close to offering any official details as to what that will look like. Netflix Chief of Operations Greg Peters wrote that “Microsoft offered the flexibility to innovate over time on both the technology and sales side, as well as strong privacy protections for our members.”

In this case, Peters wrote they’re hoping to have a “premium, better-than-linear TV brand experience for advertisers.” That industry jargon speaks to the personalised nature of streaming companies versus traditional cable broadcasting.

Other streaming platforms like Hulu, Peacock, and HBO Max already have ad-supported subscription tiers, so there’s a pretty deep well for Netflix and Microsoft to draw from. Recent news out of the Cannes Lions marketing festival showed that Netflix had been courting several companies, including Roku, Google, and Comcast to be the flame to their candle. However, the latter two companies technically remain competitors to the popular streaming service as the owners of YouTube and NBCUniversal-brand Peacock. At the Cannes festival, Netflix co-CEO Ted Sarandos told gathered industry insiders that they didn’t want to have to own its own advertising brand unless “it becomes so important” that they’re forced to bring something in-house.

Of course, it’s a good deal for Microsoft. Mikhail Parakhin, Microsoft’s president of web experiences wrote Wednesday that “marketers looking to Microsoft for their advertising needs will have access to the Netflix audience.”

Though Microsoft is not usually the first company that comes to mind when most think of the word “advertising,” Microsoft is still a quiet powerhouse in the global ad space. They have hundreds of millions of users across Microsoft Store, Bing, LinkedIn, not to mention on Xbox. The tech giant also finalised its acquisition of marketing platform Xandr last month for “data-led advertising solutions.”

Still, Netflix never wanted to be here. Co-CEO Reed Hastings said on multiple occasions that the streaming service would try to remain ad-free. Netflix still remains the biggest streamer according to subscriber numbers, but the company’s first quarter results at the beginning of this year showed it had lost subscribers for the first time in company history. Its stock price subsequently sank, and though its stock value has remained far lower than its pandemic peak, Wednesday’s news did give the price a small boost. The company cited password sharing as a major pain for why things went so haywire at the start of the year, though some analysts disagreed. The company has also suggested it would try to restrict users from loaning their accounts. Reported tests to curb password sharing in several Central American countries have not exactly gone swimmingly.

Ever since the company announced it was going to be adding ads onto the platform, users have wondered if this would change anything for how they consume content. The company has said it will maintain subscription plans for those who don’t want ads, though we don’t know whether prices will fluctuate for current users once the new tier finally drops. Subscription prices increased at the beginning of the year to $AU10.99 for the basic plan, $AU16.99 for a standard plan, and $AU22.99 for premium

A Netflix spokesperson said that since it’s still in the early days, they did not have any comment about whether the new ad-supported tier will impact pricing overall.

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