Netflix's announced ad-supported tier is progressing further with the streaming giant's recently announced partnership with Microsoft.
On July 13, Netflix shared, "In April we announced that we will introduce a new lower priced ad-supported subscription plan for consumers, in addition to our existing ads-free basic, standard and premium plans. Today we are pleased to announce that we have selected Microsoft as our global advertising technology and sales partner." It continued, "Microsoft has the proven ability to support all our advertising needs as we work together to build a new ad-supported offering. More importantly, Microsoft offered the flexibility to innovate over time on both the technology and sales side, as well as strong privacy protections for our members."
Netflix co-CEO Reed Hastings announced the ad-tier plans in a quarterly earnings call in April, stating these plans would be considered over the next year or two. He expressed his own negative perception of advertising and preference for simpler subscription offers before stated, "But as much as I am a fan of that, I am a bigger fan of consumer choice. And allowing consumers who would like to have a lower price, and are advertising-tolerant get what they want, makes a lot of sense."
Netflix in 2022
He went on to cite competing streaming services such as Hulu, Disney+ and HBO Max as examples of how effective the ad-supported tier will be in drawing subscribers in. A major difference between those services and what Netflix intends to offer is its ad-backed tier will not include data tracking and ad-matching.
Netflix has failed to meet expectations over the course of 2022, with Q1 seeing a loss of 200,000 subscribers, where it had expected to gain 2.5 million subscribers. It projected a loss of a further 2 million over Q2. After months of speculation concerning the ad-supported tier plan, CEO Ted Sarandos confirms those plans would be going ahead.
In June, Sarandos stated, "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 concluded, "We 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.'"
Source: Netflix