Netflix is well on the way to bringing commercials to the platform. Months after first confirming that an ad-supported tier was in the works, the streamer has taken a major step in making commercials a reality, on Wednesday announcing that it has partnered with Microsoft for its ad-supported service.
Netflix COO Greg Peters made the announcement in a statement, sharing that “Microsoft has the proven ability to support all our needs as we together build a new ad-supported offering.” Peters added that the company “offered the flexibility to innovate over time on both the technology and sales side, as well as strong privacy protections for our members.” While this marks a major step forward in bringing ads to the service, Peters hinted that subscribers shouldn’t expect to see ads any time soon, explaining that the planned ad-supported tier is still in the “very early days,” with “much to work through.”
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Despite being well-known for being one of the only major streaming service to not have ads, and despite previous statements expressing plans to never bring ads to the service, Netflix co-CEO Reed Hastings confirmed in April of this year the company was “open” to adding an ad-supported tier to its offerings. Hastings explained that “allowing consumers who would like to have a lower price and are advertising-tolerant get what they want makes a lot of sense,” adding that Netflix is “quite open to offering even lower prices with advertising as a consumer choice.”
Just a month later, a report from The New York Times, citing unidentified insiders and revealing a memo from executives, revealed that the ad-supported tier could be coming sooner rather than later. In a memo sent to employees, Netflix executives indicated that the company was looking to expedite the introduction of ads, with its lower-priced ad-supported tier potentially set to roll out by the end of 2022.
The planned instruction of a lower price, ad-supported tier comes amid a troubling time for Netflix. In April, the company posted its first loss of subscribers in more than a decade. The company ended Q1 of 2022 with 221.64 million subscribers, which was down from 221.84 million in Q4 of 2021. The subscriber decline was followed by a decline in Netflix stock. According to CNBC, Netflix is next set to report its earnings on Tuesday, with the company estimating that it has lost approximately two million subscribers during the second quarter.
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