Netflix partners with Microsoft on ad-supported subscriptions

The Netflix logo is seen on the TV’s remote control, in this illustration taken January 20, 2022.

Dado Ruvic | Reuters

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

“Microsoft has proven capable of supporting all of our needs as we work together to build a new ad-supported service. More importantly, Microsoft provides the flexibility to innovate over time. both technology and sales, as well as strong privacy protections for our members,” Netflix CEO Greg Peters said in a statement.

The “Stranger Things” streamer, who has struggled to retain and add subscribers, announced in April that it was planning to roll out a tier of ad support after years of resisting the move. this.

Co-CEO Reed Hastings has long opposed adding ads or other promotions to the platform but said on the company’s pre-recorded earnings conference call that it does “Let’s make it more meaningful“to offer customers a cheaper option.

Read more: Netflix announces ‘Stranger Things’ spin-off

The offering has a lot of profit potential for Netflix as it works to sign up more users. In an effort to attract more subscribers, Netflix has increased spending on its content, especially on originals. To pay for it, the company raised the price of its services. Netflix says those price changes are helping to boost revenue but are partly responsible for the loss of 600,000 subscribers in the US and Canada during the period. most recent quarter.

Netflix has been interviewing potential partners over the past few months, including Google and Comcastas it is about to launch its tier before the end of 2022.

Unlike Google, which owns YouTube, and Comcast, which owns NBCUniversal’s Peacock, Microsoft does not operate a streaming service that competes with Netflix.

Peters said the advertising efforts are still in the “early days,” with “a lot of work to do.”

Netflix is ​​expected to announce quarterly earnings on Tuesday. Earlier, it warned that it could lose 2 million subscribers in the second quarter. Netflix stock is down 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 earns revenue by displaying ads in search results, isn’t as popular as Alphabet’s Google, and in 2015 Microsoft exited the display advertising market when Aol take over that unit.

— Sarah Whitten, Jordan Novet and Alex Sherman of CNBC contributed to this report.

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