On Wednesday, Netflix Inc. announced that it had chosen Microsoft Corp. as a partner for its planned ad-supported subscription offering.
The move came as the streaming giant looks to plug, slowing subscriber growth by rolling out a cheaper plan. After years of resisting the move, the production company initially considered the service in April.
In a statement, Netflix said that Microsoft had proven the ability to support all the needs to build a new ad-supported offering. Moreover, the software maker offered the flexibility to innovate both the technology and sales side.
Co-CEO Reed Hastings previously opposed adding commercials or other promotions to the platform. However, he now cited that the move makes a lot of sense to offer customers a cheaper option.
Accordingly, experts noted that the offering has a lot of profit potential for Netflix as it works to sign up more users. Moreover, the platform has increased its content spending in an effort to lure more subscribers.
Eventually, the company raised its service prices. The company said those changes helped to bolster revenue. However, it was partially responsible for the recent loss of 600,000 subscribers in the US and Canada.
On the other hand, Netflix’s partnership is a boon for Microsoft’s advertising division. The segment contributes 6.00% of the software company’s total revenue.
Netflix’s second-quarter earnings report
Accordingly, the partnership announcement came ahead of Netflix’s second-quarter earnings report next week.
The technology firm previously warned it could lose 2.00 million subscribers in Q2. In line with this, the streamer’s shares have lost 70.44% or 420.81 points since the start of the year.
Nevertheless, there could be an upside to the upcoming report amid the return of popular series. For instance, Stranger Things recently broke viewer records.
Furthermore, Netflix joins a number of its competitors in offering ad-supported services. For example, Walt Disney’s Hulu, NBCUniversal’s Peacock, and Warner Brothers Discovery’s HBO Max already have the cheaper option.
