Netflix announced on Wednesday that they would be partnering with Microsoft and using their services to help deliver the commercials in their cheaper, ad-supported version of its video streaming service.
Netflix is expecting to launch this ad-supported tier sometime later this year. They have also pledged to minimize the intrusions into personal privacy that often accompany digital ads.
The alliance announced on Wednesday marks a significant step toward Netflix’s first foray into advertising after steadfastly refusing to include commercials in its video streaming service since its inception 15 years ago.
Netflix announced it would abandon its resistance to ads three months ago after disclosing it had lost 200,000 subscribers during the first three months of the year amid stiffer competition and rising inflation that has pressured household budgets, causing management to realize the time had come for a less expensive option.
Netflix may have been one of the most prominent players in the OTT space some time ago, but these days, the number of OTT platforms worldwide has grown exponentially. These players have been able to chip away at Netflix’s subscriber base. There is also the fact that several countries have a number of their private players in this space which is competitively priced.
Furthermore, Most of Netflix’s recent original programming for India hasn’t been received well. The shows that did perform well, like, Indian Matchmaking, were mainly designed keeping the Indian Diaspora in mind. Netflix is facing a similar situation in most South Asian countries. Shows like Squid Game from South Korea are, in fact, outliers. It did not get nearly half as much attention in South Korea as it did in the rest of the world.
Netflix had warned it would likely report much more significant subscriber losses for the April-June period, increasing the urgency to roll out a cheaper version of its service backed by ads to help reverse customer erosion. That decline has contributed to a 70% decline in its stock price so far this year, which has wiped out about $190 billion in shareholder wealth and triggered hundreds of layoffs.
The Los Gatos, California, company is scheduled to release its April-June numbers on July 19. Still, it hasn’t specified when its ad-supported option will be available, except it will roll out before 2023.
Netflix hasn’t revealed the price point at which they will launch their ad-based tier. It will likely be similar to what the American streaming service Hulu does, around $5.99 a month. Of course, in specific Asian markets, it will be cheaper.