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Netflix partners with Microsoft to launch a cheaper, ad supported subscription plan

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Highlights:

  • Netflix has named Microsoft as its partner for its ad-supported service.
  • The streamer said in April that it was planning on rolling out an ad-supported tier after years of resisting the move.
  • Netflix, which is slated to report earnings Tuesday, has warned it expects to lose 2 million subscribers during the second quarter.

Netflix will work with Microsoft to launch a cheaper subscription plan that includes advertisements, the firms said Wednesday, as the streaming giant fights to attract customers. The Company opted to develop the lower-cost offering after a disappointing first quarter in which it lost subscribers for the first time in a decade, and after years of resistance against the very idea of running ads. The ad-supported subscription will be in addition to the three options already available, the cheapest being $10 per month in the United States.

Greg Peters, Netflix’s chief operating officer and chief product officer, said that it had selected Microsoft as it “offered the flexibility to innovate over time on both the technology and sales side, as well as strong privacy protections for our members.” Peters added: “It’s very early days and we have much to work through. But our long term goal is clear. More choice for consumers and a premium, better-than-linear TV brand experience for advertisers.”

Netflix partners with Microsoft on ad-supported subscription plan

Netflix is reportedly trying to renegotiate the deals it has with major entertainment firms so that it can show adverts as part of its service. The firm has held discussions with Warner Bros., Universal and Sony Pictures Television, according to the Wall Street Journal. The partnership announcement with Microsoft comes ahead of Netflix’s second-quarter earnings report on July 19.

The offering has a lot of profit potential for Netflix as it works to sign up more users. In an effort to lure more subscribers, Netflix has increased its content spend, particularly on originals. To pay for it, the company hiked prices of its service. Netflix said those price changes are helping to bolster revenue but were partially responsible for a loss of 600,000 subscribers in the U.S. and Canada during the most recent quarter. The new business is a boon for Microsoft’s advertising division, which contributes 6% of the software company’s total revenue.

Mikhail Parakhin, President Web Experiences, Microsoft said in a blog post, “We’re thrilled to be named Netflix’s technology and sales partner to help power their first ad-supported subscription offering. At launch, consumers will have more options to access award-winning Netflix content. Today’s announcement also endorses Microsoft’s approach to privacy, which is build on protecting customers’ information.”

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