Netflix will work with Microsoft to launch a cheaper subscription plan with ads, the companies said Wednesday, as the streaming giant struggles to attract customers.
Netflix decided 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 resisting the idea of running ads.
The ad-supported subscription is offered in addition to the three options already available, the cheapest of which is $10 per month in the US.
Microsoft will be responsible for designing and managing the platform for advertisers looking to serve ads to Netflix users.
“It’s very early days and we still have a lot of work to do,” Netflix chief operating officer Greg Peters said in a statement.
Microsoft added that advertisers “will have access to Netflix audience and premium connected TV inventory.”
The addition of advertising means Netflix will expose itself to some thorny issues, including debates about collecting consumers’ personal information en masse to target them with more lucrative, personalized offers.
Analysts weren’t surprised by Netflix’s decision to go with Microsoft because it presents fewer conflicts of interest for Netflix than for some other companies.
“Unlike the top three ad sellers at Google, Meta and Amazon, Microsoft hasn’t pushed competing streaming products,” wrote analyst Ross Benes.
After years of subscriber-building, Netflix lost 200,000 customers worldwide in the first quarter compared to the end of 2021, sending its stock plummeting.
The streaming giant responded by announcing the launch of advertising on the service, aiming to fund the investments needed to maintain its leadership position in the industry it is launching.
Netflix indicated that it would become more difficult to share logins and passwords that allow many people not to pay to access the platform’s content.
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