Netflix teams up with Microsoft for advert-supported cheaper subscription plan

The streaming giant has been losing subscribers amid heightened competition

Netflix has projected a two million decline in subscribers in the second quarter. Reuters

Netflix has selected Microsoft as its global advertising technology and sales partner as it introduces a cheaper subscription plan with advertisements to counter slowing growth and attract new customers.

The streaming service announced in April it was looking at introducing advertising having lost subscribers for the first time in a decade.

The new subscription tier with adverts will run alongside the existing ads-free basic, standard and premium plans.

"Microsoft has the proven ability to support all our advertising needs as we work together to build a new advertisement-supported offering," said Greg Peters, chief operating officer and chief product officer at Netflix.

"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."

The long-term goal is for "more choice for consumers and a premium, better-than-linear TV brand experience for advertisers", Mr Peters said.

Netflix has yet to confirm how much the subscription plan with advertising will cost.

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Shares of Netflix gained 1.2 per cent to $176.56 at the close of trading in New York. The stock is down 71 per cent this year following the company’s prediction for a loss of two million subscribers in the just-ended second quarter. Microsoft shares closed down 0.37 per cent at $252.72.

Netflix will report its second quarter financial results on July 19.

The company laid off hundreds of workers last month as it sought to bring costs under control.

Its subscriber woes have come amid a price increase in January, and heightened competition from Amazon, Disney+ and Hulu, all of which have posted subscriber growth recently.

The Walt Disney Co’s Hulu, NBCUniversal’s Peacock and Warner Brothers Discovery’s HBO Max all run advertisement-supported services, while Disney also plans to introduce a version of Disney+ with commercials.

Google and Comcast had been seen as front-runners and leaders in the advertising technology and sales space, but both companies operate competing video services.

“Advertising is not exactly the first thing you think of when you think Microsoft,” Ari Paparo, who sold his advertising tech company to Comcast and then worked for it, told Bloomberg.

“However, they are global, which matters a lot to Netflix. And they aren’t competitive, like Comcast or Google.”