Netflix has chosen Microsoft to help deliver ads in a cheaper version of its streaming video service that it expects to launch later this year with a commitment to minimizing intrusions into personal privacy that often accompany digital ads.
The alliance announced Wednesday marks a major step toward Netflix’s first foray into advertising after it has firmly refused to include advertising in its video streaming service since its inception 15 years ago. Netflix announced it would drop its resistance to ads three months ago after it announced it had lost 200,000 subscribers during the first three months of the year amid tougher competition and rising inflation that has weighed on household budgets. , making management realize that the time had come for a lesser one. expensive option.
Well, maybe Netflix would be happy to make more money. The streaming service recently announced a trial that prompted account holders to share their Netflix passwords with other people, and social media was gaining momentum fairly quickly. The company says increasing its revenues with the new rate will allow for more premium content, explains Kalhan Rosenblatt, a young NBC News and Internet culture journalist.
Netflix has warned that it will likely report even larger subscriber losses for the period from April to June, increasing the urgency of launching a cheaper version of its ad-supported service to help reverse the erosion of customers. That drop has contributed to a 70% drop in its share price so far this year, draining about $ 190 billion in shareholder wealth and triggering hundreds of layoffs.
The Los Gatos, California-based company is scheduled to release its numbers from April to June on July 19, but has not yet specified when its advertising-supported option will be available, unless it expires before 2023. .Netflix’s announcement about Microsoft’s collaboration as well. omitted crucial information: the anticipated price of the ad-supported option.
“It’s very early times and we have a lot of work to do,” said Greg Peters, head of operations at Netflix, in a post that also highlighted Microsoft’s “strong privacy protections”.
The announcement’s landing with a video streaming service that boasts more than 220 million subscribers represents a major blow for Microsoft, which has been engaged in a long and often acrimonious battle for the past 20 years with Google, the force dominant in digital advertising. .
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“This deal gives Microsoft something that its growing advertising business has missed – an inventory of quality video streaming that has the potential to scale,” said Insider Intelligence analyst Ross Benes. On the same subject : Amazon Prime Day 2022: Stream Paramount Plus, Starz, Showtime, AMC Plus and more for just $1 each.
Mikhail Parakhin, Microsoft’s president of web experiences, said the Redmond, Washington-based company is “enthusiastic” about Netflix’s choice in a post that also underscored the company’s commitment to privacy.
While Microsoft still produces software that powers most of the world’s personal computers, Google has become increasingly powerful through its dominant search engine, the ubiquitous Android software for smartphones and other popular digital services that last year saw generated more than $ 200 billion in advertising revenue – much more than any other marketing network.
But Google’s advertising sales depend heavily on personal information that its mostly free services collect on its billions of users worldwide, a form of surveillance that Netflix obviously wants to avoid with commercial interruptions in its video service to decrease the chances of alienating subscribers. Google also owns the YouTube video site, which already competes against Netflix for people’s attention and will soon also be an advertising rival.
Microsoft may also have another factor working in its favor. Netflix Inc. co-founder and co-CEO Reed Hastings has served on the board of directors of Microsoft Corp. from 2007 to 2012.
