Netflix and Microsoft have partnered together to launch a cheaper subscription plan that shows advertisements, The Guardian reported.
The new plans are an attempt to appeal to consumers seeking to cut back on costs, especially as inflation and cost of living prices soar.
Announcements that a cheaper service was coming first came in April, after reports that Netflix saw its first loss of subscribers in a decade, taking almost $60 billion off its market value.
Between January and March, Netflix lost 200,000 subscribers. That, compared to the 2.5 million that analysts had expected Netflix to add to its subscriber list, was a massive hit for the company.
Netflix chief operating officer Greg Peters said Microsoft has proven it has the ability to support all advertising needs, and that the two will work together to build a new ad-supported offering.
The surprise move for Netflix to move to ad-supported packages follows its rivals, including Hulu, HBO Max, and Paramount+. Disney is preparing to introduce a similar ad-supported tier for its streaming service Disney+ late this year, and internationally next year.
The new partnership between Netflix and Microsoft precedes an expected announcement coming next week about a further loss of 2 million global subscribers in the three months until the end of June.
Peters said it was early days and the company had much to work through.
“But our long-term goal is clear. More choice for consumers and a premium, better-than-linear TV brand experience for advertisers.”
Netflix had reportedly been in talks with many potential partners to deliver the advertising sales before signing with Microsoft, including Google and NBCUniversal.
Netflix for years has been steadfast against advertising coming onto the platform.
Experts and analysts say that the combination of a cheaper pay element and ad income often makes plans more lucrative than pricier ad-free subscriptions. Netflix founder Reed Hastings said advertisements would “exploit” and disrupt the viewing experience.
But with a major loss in subscribers, Netflix has changed its tune on advertisements after terrible figures this year, and rising costs of living crises across the world.
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