Netflix Retools Deal with Microsoft, Begins Seeking New Advertising Partners as Ad-Supported Tier Comes Along Slowly
Netflix Retools Deal with Microsoft, Begins Seeking New Advertising Partners as Ad-Supported Tier Comes Along Slowly
It would be quite understandable if the rest of the streaming industry looked at Netflix with envious eyes. The service now claims 238.39 million subscribers and although its profits in the second quarter of 2023 fell short of many projections, they were still far ahead of any other streaming platform.
But it’s not all sunshine and lollipops at Netflix headquarters these days. A new report from the Wall Street Journal indicates that the streamer has tweaked its deal with Microsoft, which is providing the software necessary to support advertisements on Netflix’s Standard with Ads plan. At issue is the fact that Standard with Ads is still not pulling in new users at the rate Netflix had hoped.
To combat thus-far weak revenue from its ad-supported plan, Netflix is modifying its arrangement to lower the guaranteed revenue Microsoft has to pay the streamer. In exchange, Netflix will be allowed to start seeking other potential advertising partners, though it will not abandon Microsoft; the deal between the companies for Microsoft’s ad tech expires in 2024.
Netflix is also offering advertisers better prices in order to boost revenues. Initially, Netflix was charging many brands between $45 and $55 per 1,000 views to advertise on its platform, but now the number has fallen to between $39 and $45. Company executives said during Netflix’s conference call to discuss its quarterly earnings that the company is more focused on building revenue from enacting rules against password sharing and that Standard with Ads isn’t expected to be a meaningful contributor to its overall revenues this year.
Still, the number of moves that Netflix has had to make to boost the profile of its ad-supported plan must be disappointing to the company’s higher-ups. Netflix recently discontinued its cheapest ad-free tier in the United States, hoping that the move coupled with account-sharing restrictions would drive more customers to Standard with Ads.
The Journal reports data from Antenna which shows that as of the end of June, just 3.3% of Netflix subscribers were on the ad-supported plan. That confirms data from other surveys which shows Netflix is still behind Disney+ in terms of new signups for their respective ad plans. Some rough math indicates that 3.3% translates to around 7 million of Netflix’s 238 million+ global users.
It’s still far too early to consider calling Netflix’s foray into ad-supported streaming a failure. Netflix still accounted for over 8% of total TV viewing time in June according to Nielsen, and the service reigns supreme over the streaming landscape. But Standard with Ads still clearly needs some tweaks, and Netflix is hoping they won’t need to be too drastic to get the plan rolling.
Netflix
Netflix is a leading subscription-based video streaming service that offers on-demand access to an extensive library of over 3,000 movies, 2,000+ TV shows, and a growing collection of acclaimed Netflix originals. Renowned for producing groundbreaking content, Netflix has become a cultural powerhouse with hit originals like “Stranger Things,” “Wednesday,” “Squid Game,” “The Crown,” “Tiger King,” “Bridgerton,” “The Witcher,” and “Black Mirror.”