Netflix had surprised in April with the announcement of disappointing business figures with the announcement that they want to offer a cheaper subscription with advertising in the future. The company has now found an unexpected partner for this: According to a report, the software company is to help Microsoft build the advertising-financed Netflix version. This should apply to the technical side as well as to advertising sales. It should be an exclusive alliance, all ads on Netflix should run on Microsoft’s platform in the future.
Microsoft has some advertising activities under its roof, but isn’t nearly as big in the business as Google, Meta, or even Amazon. On the one hand, the company generates advertising revenue via its search engine Bing, which brought in sales of 8.5 billion dollars in the past fiscal year, around 5 percent of group sales. On the other hand, Microsoft also sells ads on its LinkedIn careers platform. The market research group Insider Intelligence put Microsoft’s share of the market for online advertising in the USA at less than 4 percent.
However, Microsoft is trying to expand the business and a few months ago bought the advertising platform Xandr, which previously belonged to the AT&T telecommunications group, and which could now also help to set up the new Netflix subscription. In the past few weeks, other companies have actually been in talks as partners for Netflix, such as Google or the media group Comcast. Unlike those, however, Microsoft doesn’t have any video offerings that compete with Netflix, which may have played a role in the decision.
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Netflix lost subscribers in the first three months of the year for the first time in a long time. For the second quarter, the company has predicted an even sharper decline. It has credited its exit from Russia and broader macroeconomic factors, such as rising inflation, but also increased competition, for this slowdown.
Coupled with the poor numbers was the announcement of a cheaper subscription plan with ads, which is a notable turnaround for Netflix. The group had always boasted that, unlike traditional television broadcasters, it would not expect its audience to have any commercial breaks. Details of the ad-supported Netflix subscription such as a price are not yet known. Netflix stock, which used to be a stock market darling, has fallen about 70 percent since the beginning of the year. The company has also laid off several hundred employees in recent months.
