Netflix Teams With Microsoft To Launch Ad-Supported Service — Did It Help Stock?

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Netflix announced it chose Microsoft to help with the company’s first ad-supported subscription offering, saying it endorsed Microsoft‘s approach to privacy, “which is built on protecting customers’ information.”

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“In April we announced that we will introduce a new lower priced ad-supported subscription plan for consumers, in addition to our existing ads-free basic, standard, and premium plans,” Netflix COO Greg Peters said in a press release. “Today we are pleased to announce that we have selected Microsoft as our global advertising technology and sales partner.”

Microsoft reportedly edged out Comcast and Google, which were both “top contenders” to serve the ads on Netflix, as well.

Netflix posted extremely disappointing earnings in April, revealing it lost 200,000 paid subscribers in the first quarter, which triggered the stock to drop 27% to a three-year low in pre-market trading April 20, as GOBankingRates reported.

Increased competition from other streaming services along with the launch of new platforms put pressure on the company, and Co-Chief Executive Reed Hastings said in an earnings call that the company was working on how to monetize sharing, hinting at ad-supported services.

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“We’ve been thinking about that for a couple of years. But when we were growing fast, it wasn’t the high priority to work on. And now, we’re working super hard on it. And remember, these are over 100 million households that already are choosing to view Netflix. They love the service. We just got to get paid at some degree for them,” he said.

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The announced Microsoft partnership has not affected Netflix’s stock price much so far. Shares of Netflix are down a whopping 70.4% year-to-date, but didn’t move much Monday, and are down around 1% in pre-market trading on July 14.

Netflix said it picked Microsoft as it “offered the flexibility to innovate over time on both the technology and sales side, as well as strong privacy protections for our members.”

Hastings said, “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.”

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.

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