You could be forgiven for wondering whether the headline ‘Netflix teams up with Microsoft’ was part of an immersive marketing campaign cooked up by Charlie Brooker’s Dark Mirror team as it was revealed this week that the dystopian tech anthology is coming back for a sixth season – but, alas this is indeed a legit news story.
Microsoft Corporation (NASDAQ:MSFT) will work with Netflix Inc (NASDAQ:NFLX) as part of the streamer’s project to introduce a lower-price advertising-included subscription.
“All adverts served via Netflix will be exclusively available through the Microsoft platform,” the Xbox and Windows software giant said in a blog post on Wednesday night, adding that it was “a big day” for Netflix and Microsoft.
Microsoft said that its selection (presumably ahead of ad-tech rivals like Google) “endorses Microsoft’s approach to privacy, which is built on protecting customers’ information”.
Netflix chief operating officer Greg Peters, who described Microsoft as its “global advertising technology and sales partner”, meanwhile, said: “Microsoft offered the flexibility to innovate over time on both the technology and sales side, as well as strong privacy protections for our members.
“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. We’re excited to work with Microsoft as we bring this new service to life.”
Netflix’s move towards ad-breaks, for a new bracket of lower-margin customers, comes as the streaming firm comes to terms with slowing user growth – basically, adapting its business model to acknowledge that almost everyone who wants a Netflix account now likely has one.
In its ascent to dominate the online streaming sector, Netflix has spent huge sums on content production and acquisition, with some stand-out hits such as Stranger Things, Hunger Games and Black Mirror, but has also been a concern with some investors who question the sustainability of ongoing the capital investment and borrowing required to keep these shows and movies coming year-in year-out.
At the same time, “Hollywood” has closed ranks somewhat, leveraging its cultural heft and intellectual property catalogues into ‘direct-to-consumer’ streaming platforms such as Disney+, HBO Max, NBC Universal’s Peacock, Discovery+ and Paramount+.
Silicon Valley similarly competes with both Amazon Prime and AppleTV, also challenging Netflix for market share.
Netflix next week reports on its second quarter with user numbers likely to again be under scrutiny.
In February, it reported a 200,000 drop in subscribers and projected a possible 2mln further decline in account numbers this year as consumers faced the cost-of-living crisis.
Along with its new ad-supported subscriptions, Netflix also said it would look to clamp down on so-called ‘account sharing’ in which friends and relatives share passwords rather than set up multiple paid subscriptions.