Source: Netflix and Microsoft
Netflix recently announced it picked Microsoft to become its technology and sales partner for its new advertising-supported tier. This new tier should be a more affordable option for viewers while also drawing in additional revenue for the company. Its slowing growth has forced the streaming service to look at new ways to attract subscribers. And it is one solution it announced back in April after reporting a drop in its subscriber base.
The company set a tight time frame for this rollout, so it needed a third party to handle the sales and technology. Netflix has reportedly met with Google and Comcast, but these companies have rival streaming services. Microsoft will now be the exclusive server and seller of ads on Netflix. While Microsoft doesn't come to mind when you think about advertising sales, it generated US$10 billion in ad sales last year and bought Xandr, AT&T's ad business.
Microsoft's Xandr has technology that can automate selling and serving ads globally, which is what Netflix needs. And Microsoft's considerable investment in video games (through the Xbox) can also help Netflix's gaming ambitions.
Netflix hasn't shared information on how it'll bring ads into the service. As Bloomberg noted, it might need to negotiate with existing and new partners on rights to insert spots into programs that content providers shot for ad-free service. Those who license content to them might also demand additional payment. With Netflix going full steam ahead with this plan, we're sure to hear more about this in the coming weeks and months.