Ioanna is a writer at TNW. She covers the full spectrum of the European tech ecosystem, with a particular interest in startups, sustainabili Ioanna is a writer at TNW. She covers the full spectrum of the European tech ecosystem, with a particular interest in startups, sustainability, green tech, AI, and EU policy. With a background in the humanities, she has a soft spot for social impact-enabling technologies.
Whether we like it or not, ad-supported subscriptions for Netflix are coming — and they’ll be powered by Microsoft.
On Wednesday, the streaming platform named Microsoft as its global advertising technology and sales partner.
This is what Peter Gregs, Netflix’s COO and CPO, has to say about it:
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.
More consumer choice said to be the goal
Gregs emphasized that the partnership aims to provide consumers with more options.
This goes in line with Ted Sarantos’ — Netflix’s co-CEO — comments during his interview with Kara Swisher at Cannes Lions in June.
We’ve left a big customer segment off the table, which is people who say: “Hey, Netflix is too expensive for me and I don’t mind advertising.” We’re adding an ad tier; we’re not adding ads to Netflix as you know it today. We’re adding an ad tier for folks who say, “Hey, I want a lower price and I’ll watch ads.”
It makes sense: Netflix is expensive. I have the Premium subscription for which I’m paying €15.99 ($19.99) a month. This rose by €2 in December — with the exact same offering, mind you.
The thing is, even if Netflix simply includes an ad-tierplan under its cheapest Basic subscription (based on current pricing that should be less than €7.99 or $9.99), there’s no guarantee that it’ll remain like this in the future.
It’s possible that eventually all plans but Premium will start including a percentage of ads to push consumers into spending more money.
And there’s another concern: how invasive are the ads going to be? It’s tolerable to watch an ad at the beginning of your movie, or upon entering the platform, but what if we’re talking about a YouTube-like interruption? The horror!
Not an unlikely partnership
In any case, Netflix and Microsoft’s partnership seems like a win-win scenario for both companies.
First off, Netflix will have access to Microsoft’s vast network of advertising partners.
Combine that with the possibility to attract a larger audience with cheaper plans, and there’s a chance the company can counterbalance the revenue lost from the 200,000 canceled subscriptions in Q1 2022 — and the expected 2 million more in the second quarter.
For Microsoft, whose total revenue from advertising surpassed $10 billion in 2021, this partnership presents an opportunity to attract even more advertisers.
Here’s the statement by the company’s president of web experiences Mikhail Parakhin:
Marketers looking to Microsoft for their advertising needs will have access to the Netflix audience and premium connected TV inventory. All ads served on Netflix will be exclusively available through the Microsoft platform.
Let’s just hope both companies won’t put profit ahead of pleasing consumers — even though we can all guess how this will end.
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