When Netflix last reported its quarterly earnings in April, the streaming giant revealed that it had suffered a quarterly subscriber loss for the first time since 2011. On the heels of that revelation, co-CEO Reed Hastings announced that the streamer would reverse course on more than a decade’s worth of corporate policy and introduce advertising into a lower-priced tier. In the aftermath of that announcement, reports began to surface that the company was aiming to bring the budget-conscious option to the market before the end of the year.
However, one of the major issues that Netflix faced was that unlike streaming competitors including HBO Max and Disney+ that have or soon will introduce ad-supported options, the world’s largest streamer has no experience or internal apparatus to sell or serve advertising on its platform. Through corporate sibling networks and streamers, both Warner Bros. Discovery and Disney have decades of experience in that arena, giving them a leg up in the race to advertising.
However, thanks to the introduction of an ad-supported option, analysts believe that Netflix could raise its revenue by 21% reaching more than $1 billion by 2025.
Therefore, with no institutional experience in advertising, in order to maximize this opportunity, Netflix has recently been involved in discussions about bringing in a third-party company to handle the sales and implementation side of the advertising business. The streamer reportedly discussed partnering with Roku, Comcast, and Google — all of whom have their own streaming services — but on Wednesday, in a pair of joint statements, Netflix and Microsoft announced that they would be working together on the advertising endeavor.
Related: How Will Netflix Incorporate Advertising into Lower-Cost Tiers?
“Today we are pleased to announce that we have selected Microsoft as our global advertising technology and sales partner,” Netflix’s chief operating officer and chief product officer Greg Peters 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.”
Peters also notes that the process of incorporating advertising into Netflix’s offerings is still in its “very early days,” but that the long-term goal remains to be providing customers with the best possible experience while also giving advertisers a “better-than-linear” advertising opportunity.
“This is a big day for Netflix and Microsoft. We’re excited to offer new premium value to our ecosystem of marketers and partners while helping Netflix deliver more choice to their customers,” Microsoft’s president of web experiences Mikhail Parakhin said. “At launch, consumers will have more options to access Netflix’s award-winning content. Marketers looking to Microsoft for their advertising needs will have access to the Netflix audience and premium connected TV inventory. Today’s announcement also endorses Microsoft’s approach to privacy, which is built on protecting customers’ information.”
Netflix
Netflix is a subscription video streaming service that includes on-demand access to 3,000+ movies, 2,000+ TV Shows, and Netflix Originals like Stranger Things, Squid Game, The Crown, Tiger King, and Bridgerton. They are constantly adding new shows and movies. Some of their Academy Award-winning exclusives include Roma, Marriage Story, Mank, and Ma Rainey’s Black Bottom.