Netflix joins hands with Microsoft to boost slowing subscriber growth

Netflix Inc said on Wednesday it has selected Microsoft Corp as technology and sales partner for its planned ad-supported subscription offering, as the streaming giant looks to plug slowing subscriber growth by rolling out a cheaper plan.

Shares of Netflix rose 2% to $178.06 on the news.

Netflix said in April that it would introduce a new, lower-priced version of its service in a bid to attract more subscribers. The announcement came as the pioneering subscription service posted its first subscriber loss in more than a decade, and projected deeper losses to come.

Chief Operating Officer Greg Peters said in a blog post that Netflix chose Microsoft because of its ability to innovate, as well as for its strong privacy protections.

“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," Peters said.

Microsoft is expected to power Netflix`s ad sales.

The software giant brought in $10 billion in ad revenue last year, selling ads on various services such as its Bing search engine and its business-focused social network, LinkedIn. Last month, Microsoft completed its acquisition of AT&T Inc`s online advertising platform, Xandr Inc., which allows advertisers to buy ad space across thousands of websites and target audiences.

Microsoft President Brad Smith has served on Netflix`s board since 2015.

The partnership announcement comes ahead of Netflix’s second-quarter earnings report on Tuesday. The company cautioned investors it could lose as many as 2 million subscribers in the period, despite the return of such popular series as “Stranger Things,” which broke viewer records.

Netflix joins a number of its rivals in offering ad-supported service, including Walt Disney Co’s Hulu, NBCUniversal’s Peacock and Warner Brothers Discovery’s HBO Max.
Disney also plans to introduce a version of Disney+ with commercials.

Researcher Comscore Inc said such ad-supported services are seeing a faster rate of adoption than subscription services, as inflation pinches consumers` wallets.

“The time is ripe for traditionally subscription-based streaming services like Netflix to consider launching an ad-supported tier to enhance their growth trajectory,” Comscore`s James Muldrow said in a statement.