In a recent announcement, Netflix said they are partnering with Microsoft to add a cheaper ad tier to their network. Microsoft says Netflix marketers will work with them to bring ads to customers who choose cheaper Netflix ad tiers.
The “announcement also endorses Microsoft’s approach to privacy, which is built on protecting customers’ information,” Mikhail Parakhin, Microsoft’s President of Web Experiences, says.
The news was met with skepticism from ad-free bingers who have stuck with the company.
Last quarter Netflix saw its first decline in subscribers in a decade, losing 200,000 customers worldwide with worries the consumer exodus could worsen. The company warned they could lose up to 2 million subscribers in the second quarter.
Business as usual can’t continue. That’s the bad news.
The good news is that they have much to celebrate.
From viewers binging Shondaland’s record-setting Bridgerton to catching the latest K-Drama or tuning into a Netflix Original like The Tinder Swindler or the epic fourth season of Stranger Things, their 222 million subscribers spend hours on their accounts.
The streaming company says the average user spends 3.2 hours a day watching shows on the service.
Other than price increases, Netflix has pretty much stuck to its tried and true business model, and as subscribers start to bail on streaming services they decide they don’t need, a partnership with Microsoft to launch ad tiers could be just the ticket to profits for the company.
When rumors of an ad tier started Netflix co-CEO, Ted Sarandos, said current customers won’t have to worry about ads.
“We’ve left a big customer segment off the table, which is people who say: ‘Hey, Netflix is too expensive for me and I don’t mind advertising,’” Sarandos said. “We are adding an ad tier; we’re not adding ads to Netflix as you know it today. We’re adding an ad tier for folks who say, ‘Hey, I want a lower price and I’ll watch ads.’”
This isn’t the first time the company has partnered with Microsoft. Back at the beginning of streaming, users had to download Microsoft’s Silverlight to watch content online.
Now, maybe, new customers will choose a serving of ads with their Netflix binging content for a cheaper subscription rate. Time will tell.