Netflix has secured a deal with Microsoft to introduce advertising breaks for its streaming service as it scrambles to offset a fall in subscribers by offering a cheaper service for customers.
The streaming giant has chosen Microsoft to be its global technology and sales partner and will provide ads through its platform, its chief operating officer Greg Peters said on Wednesday.
He said: “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.
“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.”
Netflix announced plans in April to introduce a new, cheaper, subscription package containing ads amid fierce competition from streaming rivals and soaring inflation.
It will be launched by the end of 2022 and the ads will only be visible to customers signing up for the new service.
Netflix has been forced to source an outside partner to handle the sales and technology after setting a tight deadline to get the service up and running. Google and Comcast were seen as frontrunners.
The company has long made the absence of ads a major part of its selling point to customers.
However, slowing growth after the pandemic forced it to seek new ways to prop up revenue streams.
It lost 200,000 subscribers in the quarter to April, the first time in ten years, and is estimated to lose another two million in the following three months.
The next quarterly financial report is due to be published next week.
Introducing advertising has already posed challenges for Netflix, which will have to decide how and if it wants to insert commercials into original series that were shot and edited for an ad-free service.
It will also have to negotiate the right to insert spots into programmes it has licenced from other companies, which may demand additional payment.
Shares rose over 1pc to $176 (£148) after the deal was announced, but were still 71pc lower than in January. Microsoft was flat at $252.
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