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Microsoft to help Netflix launch its ad-supported subscription plan

After suffering through major subscriber loss this year, Netflix is finally looking toward an ad-supported subscription plan as its answer. How does Microsoft come into the picture?

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This photo shows the company logo and view of Netflix headquarters in Los Gatos, Calif.

This photo shows the company logo and view of Netflix headquarters in Los Gatos, Calif., Jan. 29, 2010. Netflix has picked Microsoft help deliver the commercials in a cheaper version of its video streaming service expected to launch later this year with a pledge to minimize the intrusions into personal privacy that often accompany digital ads. The alliance announced Wednesday, July 13, 2022, marks a major step toward Netflix’s first foray into advertising after staying commercial-free for 15 years.

Marcio Jose Sanchez, Associated Press

Netflix wasn’t kidding when it said it will start offering a subscription with ads.

The streaming service announced Wednesday that Microsoft will be its partner to create this new offering, which will be in addition to its existing ad-free basic, standard and premium subscription plans.

What they’re saying: “Microsoft has the proven ability to support all our advertising needs as we work together to build a new ad-supported offering,” said Greg Peters, the chief operating officer and chief product officer at Netflix, according to CNBC.

“More importantly, Microsoft offered the flexibility to innovate over time on both the technology and sales side, as well as strong privacy protections for our members,” he added.

Flashback: Only last month, the streaming giant laid off 300 employees, 3% of its workforce, due to disappointing reports from the first quarter of 2022, released in April — a loss of 200,000 subscribers, missed revenue projections and the unsolved problem of the 100 million nonpaying users.

Netflix also lost 700,000 subscribers when it discontinued its services in Russia, while password sharing and rival streaming services contributed to the problem, according to BBC News.

Worth noting: After 15 years of resisting ads, the company decided to create a more affordable plan and started interviewing potential partners, including Google, which owns YouTube, and Comcast, which owns Peacock. Ultimately, Netflix decided to proceed with Microsoft, which has Bing, LinkedIn and ad-tech operating company Xandr under its umbrella.

State of play: All ads on Netflix will now be “exclusively available through the Microsoft platform” while protecting customer privacy, said Mikhail Parakhin, the president of web experiences at Microsoft, in a press release.

The streamer will now join the ranks of Peacock and HBO Max with its ad-supported offering. Disney+ also has plans to offer an ad-supported subscription tier later this year, according to Variety.