Netflix has signed a deal with Microsoft to introduce advertising breaks for its streaming service as it strives to compensate a decrease in the number of subscribers by offering a cheaper service to customers.
The streaming giant has chosen Microsoft as its global technology and sales partner and will serve ads through its platform, Chief Operating Officer Greg Peters said Wednesday.
He said, “Microsoft has the proven ability to support all of our ad needs as we work together to build a new ad-supported offering.
More importantly, Microsoft provided the flexibility to innovate over time on both the technology and sales sides, as well as strong privacy protections for our members.
“It is still very early and we still have a lot to process. 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 launch a new, cheaper, subscription package with ads amid fierce competition from streaming rivals and rising inflation.
It will launch in late 2022 and the ads will only be visible to customers who sign up for the new service.
Netflix has been forced to look for a third-party partner to handle sales and technology after a tight deadline has been set for the service to go live. 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 the company to look for new ways to support revenue streams.
It lost 200,000 subscribers in the quarter to April, the first time in a decade, and is estimated to lose another two million in the next three months.
The next quarterly financial report will be published next week.
The introduction of ads has already created challenges for Netflix, which will have to decide how and whether to insert commercials into original series shot and edited for an ad-free service.
It will also have to negotiate the right to insert spots into programs it has licensed from other companies, which may require additional payment.
Shares rose more than 1 percent to $176 (£148) after the deal was announced, but were still 71 percent lower than in January. Microsoft was flat at $252.