Netflix and ads: Streaming giant teams up with Microsoft to launch cheaper subscription plan
Netflix announced a partnership with Microsoft late yesterday to introduce a “lower priced ad-supported subscription plan” to drive down its prices.
The advert option will be an “addition” to the existing plans and will not feature on all offers.
The streaming giant has not said how much the reduced package will cost, but comes after a difficult few months of dwindling subscriber numbers and a flurry of job cuts.
Netflix’s chief operating officer Greg Peters said in a statement: “It’s very early days and we have 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,” he added.
Back in April, Netflix said subscribers were down 200,000 and predicted a further two million subscriber losses.
Not only did this cause the share price to plunge, wiping $40bn off its market value, but it has also had a knock-on effect on operations.
Netflix is set to cut back on its content, and revealed earlier this month that it would be cancelling the development of Meghan Markle’s project Pearl.
It is understood that rival Disney+ is also set to introduce ads in the coming months.
TMT analyst at PP Foresight Paolo Pescatore told City PM said that the move comes at a crucial time given the cost of living crisis.
He told City PM that a low cost ad-supported function may help “convert freeloaders”, but ultimately be low enough to attract users to sign up and keep them engaged.
Pescatore said this needed to be 25 per cent to 50 per cent less than what viewers are paying now.
“The market’s view of Netflix needs to change rather than solely fixated on net adds. This coupled with the need for Netflix to diversify then it will be in a far stronger position. With a base of more than 200m it should position itself as a one stop shop for users all streaming media. Regardless, expect to see a challenging year for all streamers”, he said.