Given Ruvic | Reuters Netflix has named Microsoft as its partner for the ad-supported service, the companies announced Wednesday. “Microsoft has the proven ability to support all of our needs as we build a new ad-supported offering together. Most importantly, Microsoft has provided the flexibility to innovate over time on both the technology and sell-side, as well as strong privacy protections for our members,” Netflix COO Greg Peters said in a statement. The “Stranger Things” streamer, which has struggled to retain and add subscribers, announced in April that it planned to open an ad-supported tier after years of resistance to the move. Co-CEO Reed Hastings has long opposed adding ads or other promotions to the platform, but said during the company’s pre-recorded earnings conference call that “it makes a lot of sense” to offer customers a cheaper option. Read more: Netflix announces ‘Stranger Things’ spinoff The offer has a lot of profit potential for Netflix as it works to sign up more users. In an effort to attract more subscribers, Netflix has increased its content spending, particularly on originals. To pay for it, the company raised the prices of its service. Netflix said those price changes are helping to boost revenue, but were partly responsible for the loss of 600,000 subscribers in the US and Canada in the last quarter. Netflix has been interviewing potential partners in recent months, including Google and Comcast, as it prepares to launch the tier before the end of 2022. Unlike Google, which owns YouTube, and Comcast, which owns NBCUniversal’s Peacock, Microsoft does not operate a competing streaming service to Netflix. Peters said the advertising efforts are still in the “very early days,” with “a lot of work to do.” Netflix is set to report quarterly earnings on Tuesday. It had previously warned it could lose 2 million subscribers in the second quarter. Netflix shares are down more than 70% year-to-date. The company’s stock rose more than 1.5 percent on Wednesday afternoon in an otherwise bearish day for markets after June inflation data came in higher than expected. The new business is a boon for Microsoft’s advertising division, which contributes 6% of the software company’s total revenue. The Bing search engine, where Microsoft collects revenue by serving ads in search results, is not as popular as Alphabet’s Google, and in 2015 Microsoft exited the display ad market as Aol took over that unit. —CNBC’s Sarah Whitten, Jordan Novet and Alex Sherman contributed to this report.
