On Wednesday, July 13, Netflix announced that it has partnered with Microsoft for its upcoming ad-supported service. 

Netflix and Microsoft to Launch Ad-Supported Subscription

Netflix COO Greg Peters said in a statement that Microsoft has the ability to support the company's needs as they build a new ad-supported offering. 

According to CNBC, Microsoft has offered Netflix the flexibility to innovate over time on both the technology and sales side, as well as strong privacy protections for their members. 

The streaming service, which has been struggling to retain and add subscribers, announced back in April that it was planning on rolling out an ad-supported tier after years of resisting the plan. 

Netflix's Co-CEO Reed Hastings has long been opposed to adding commercials or other promotions to the streaming service, but he said during the company's earnings conference call that it "makes a lot of sense" to offer their customers a cheaper option. 

Also Read: Amazon Denies Report it Is Offering Netflix-Type Video-Streaming Service. Or Did It?

The new offering has a lot of profit potential for Netflix because it works to sign up more users. In an effort to entice more subscribers, the streaming service has increased its content spend, especially on original TV shows and movies. 

In order to pay for its contents, the company increased the prices of its subscriptions. Netflix said that the price changes are helping to bolster revenue but were also responsible for a loss of 600,000 subscribers in the United States and Canada during the first three months of 2022. 

Since then, Netflix has been interviewing potential partners for the past few months, including Comcast and Google, as it prepares to launch the ad-supported tier before the end of 2022. 

Eventually, Netflix has decided to team up with Microsoft because it does not operate a competing streaming service as Google owns YouTube and Comcast owns Peacock. 

Peters said that the ad efforts are still in their early days, and they are still working on it. 

Netflix is slated to release its quarterly earnings on July 19. It has warned that it could lose 2 million subscribers during the second quarter of 2022. 

The shares of Netflix have dropped more than 70% so far, and its stock was up more than 1.5% on July 13's trading on an otherwise down day for the markets, after the inflation data for June came in higher than expected, according to The Verge. 

The new business is a boon for Microsoft's advertising division, which contributes a total of 6% of the company's revenue. 

Bing, a search engine that Microsoft operates, is not as popular as Google, and in 2015 Microsoft exited the display ad market as AOL took on the unit. 

Netflix's Shaky Reputation

In the latest Emmys announcement, Netflix picked up a total of 105 nominations for its original content. Although it is an impressive number, it is still a sign of trouble. 

According to GQ, the nominations grew for years after its first nominations in 2013. The number doubled in 2014.

However, by 2021, the number of nominations shrank as HBO Max produced original content that garnered more attention. 

With the upcoming ad-supported tier, Netflix can give more people access to its content, and it can use its funds to pay for high quality TV shows and movies.  

Related Article: Netflix Says It Is 'Open' To Lowering Prices Via An Ad-Supported Subscription 

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Written by Sophie Webster