Netflix has struck a deal with Microsoft to introduce ad breaks for its streaming service as it struggles to offset declining subscribers by offering a cheaper service to customers.
The streaming giant has chosen Microsoft as its global technology and commercial partner and will serve ads through its platform, its chief operating officer Greg Peters said on Wednesday.
He said: “Microsoft has a proven ability to support all of our advertising needs as we work together to build a new ad-supported offering.
“More importantly, Microsoft offered the flexibility to innovate over time on both the technology and sales sides, as well as strong privacy protections for our members.”
“It’s very early and we have a lot to work on. But our long-term goal is clear: Greater choice for consumers and a premium, better-than-linear TV experience for advertisers.”
Netflix announced plans in April to introduce a new, cheaper subscription package containing ads amid fierce competition from streaming rivals and rising inflation.
It will be rolled out by the end of 2022, and ads will only be seen by customers who sign up for the new service.
Netflix was forced to find an outside partner to handle sales and technology after setting a tight deadline to launch the service. Google and Comcast were considered the leaders.
The company has long made the lack of ads a major part of its selling point for customers.
Slowed growth since the pandemic, however, has forced it to look for new ways to maintain revenue streams.
It lost 200,000 subscribers in the quarter to April, the first time in ten years, and is expected to lose another two million in the next three months.
The next quarterly financial report is due next week.
The introduction of advertising has already posed challenges for Netflix, which will have to decide how and whether it wants to insert ads into original series that are filmed and edited for the ad-free service.
It will also have to negotiate the right to insert spots into programs it has licensed from other companies, which may require additional payment.
Shares rose more than 1% to $176 (£148) after the deal was announced, but were still 71% lower than in January. Microsoft remained at the $252 level.
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