Netflix joins forces with MICROSOFT to develop an ad-supported, cheaper subscription plan – after it lost 200,000 subscribers and its stock plunged

  • Netflix partners Microsoft to develop ads for a new, cheaper subscription plan
  • The new Netflix tier will force customers to watch ads but they’ll still have to pay
  • The streaming giant announced three months ago that it would introduce ads 

Netflix is joining forces with Microsoft to develop adverts for a new, cheaper subscription plan – and potentially hold on to its subscribers. 

Microsoft will be the streaming giant’s ‘technology and sales partner’ on its first ad-supported subscription offering, due to become available by the end of 2022. 

Since its inception 15 years ago, Netflix has refused to include commercials in any of its offerings, but that has all changed this year. 

Three months ago, Netflix announced it would abandon its resistance to ads after disclosing it had lost 200,000 subscribers during the first three months of the year. 

Netflix has warned it will likely report even larger subscriber losses for the April-June period, set to be revealed on July 19. 

Netflix is joining forces with Microsoft to develop adverts for a new, cheaper subscription plan

NETFLIX’S UK PRICES

Basic: £6.99 (one screen at a time)

Standard: £10.99 (two screens at a time, HD available)

Premium: £15.99 (four screens at a time, Ultra HD available)

More info: Netflix.com  

The Los Gatos, California streaming firm hasn’t announced how much the new ad-supported version will cost, although it will be cheaper than the lowest-priced ad-free tier, which costs £6.99 a month. 

‘We are pleased to announce that we have selected Microsoft as our global advertising technology and sales partner,’ said Greg Peters, Netflix’s chief operating officer. 

‘Microsoft has the proven ability to support all our advertising needs as we work together to build a new ad-supported offering. 

‘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.’

Peters said the new tier will be in addition to Netflix’s existing Basic, Standard and Premium plans, which are all ad-free. 

Netflix’s streaming rival Disney+ is also introducing an ad-supported subscription tier later this year, although similarly the price is not yet known.   

To generate revenue, online services have to work out a balance between money from the user and money gained from hosting adverts. 

For example, YouTube is free because it forces people to watch ads before and during videos, although it does offer an £11.99-a-month ad-free ‘Premium’ option too.

However, Netflix’s new ad-supported option won’t be free, meaning customers will have to endure ads while also paying a monthly subscription price. 

This news has gone down badly with some customers – Twitter user @Kar0l15 said: ‘I won’t f***ing pay to watch their ads! Are you kidding me?’ 

Another user, @imhaaron, said: ‘ad free was literally why people got netflix.’  

The new Netflix tier will feature ads – but it won’t be free. Twitter user @Kar0l15 replied to a post by Microsoft CEO Satya Nadella

An unpopular decision? Twitter user @imhaaron posted: ‘ad free was literally why people got netflix.’

DISNEY+ TO INTRODUCE AD TIER 

Disney+ will introduce an ad-supported subscription option in addition to its option without ads, beginning in the US in late 2022, with plans to expand internationally in 2023. 

The ad-supported offering is viewed as a building block in the company’s path to achieving its long-term target of 230-260 million Disney+ subscribers by FY24.

More details, including launch date and pricing, will be announced at a later date. 

‘Expanding access to Disney+ to a broader audience at a lower price point is a win for everyone – consumers, advertisers, and our storytellers,’ said Kareem Daniel, chairman for Disney Media and Entertainment Distribution. 

Meanwhile, EorisWasTaken posted: ‘so we’re going to pay for ads now!?! bruhhhhhhhhh, Netflix and Microsoft no.’ 

It was back in April that Netflix CEO Reed Hastings revealed in an earnings call that the platform would introduce ads in the ‘next year or two’.

Netflix had lost 200,000 subscribers in the first three months of the year, and expected to lose two million more in the second quarter.

The share price fell significantly following the news, wiping away roughly $70 billion in the company’s market capitalisation. 

Then in May, Netflix told its employees that it would introduce ads sooner than expected – by the end of the year, The New York Times revealed. 

‘Yes, it’s fast and ambitious and it will require some trade-offs,’ Netflix said in a a note to employees, seen by The New York Times.

‘Every major streaming company excluding Apple has or has announced an ad-supported service. For good reason, people want lower-priced options.’

Executives pointed out that HBO and Hulu have been able to ‘maintain strong brands while offering an ad-supported service’. 

The news led to a furious backlash from some users, who threatened to cancel their subscriptions if they had to endure ads. 

Twitter user @UCantCensorThis posted: ‘Hey @netflix. I’m letting you know now that if I EVER see a single ad interrupt anything I’m watching on your service, I will cancel faster than you can say ‘commerical break’.’ 

Reed Hastings, the co-chief executive of Netflix, said in April that the company was looking into bringing in an advertiser-supported cheaper streaming service within the next couple of years. The plan appears to have been dramatically sped up, and the service is now due to be unveiled at the end of this year

A survey of 2,922 UK consumers by mobile advertising platform LoopMe revealed that more than a third (36 per cent) of UK consumers would cancel their Netflix subscription if it became ad-funded.

However, 34 per cent stated they would continue to subscribe if it meant they could pay a cheaper price with ads. 

Paolo Pescatore, analyst at PP Foresight, suggested that in order to attract users to sign up and keep them engaged, the new ad-supported plan would need to be ‘somewhere between 25%-50% less than what they’re paying today’.

Jem Lloyd-Williams, CEO of media agency Mindshare UK, said that, for some, the trade-off between saving some money each month and watching adverts might prove attractive. 

‘As long as Netflix continues to invest in high quality content, we think this could be the right move at the right time for the streaming giant,’ he said. 

Netflix’s streaming rival Disney+ is also introducing an ad-supported subscription tier later in 2022, although similarly the price is not yet known

With around 220 million subscribers around the world, Netflix is the world’s biggest streaming service. 

Among this total, there are around 17 million subscribers in the UK, according to Statista.

In March 2022, Netflix bumped up its UK prices for the second time in just over a year. 

The basic and standard plans both increased by £1 a month to £6.99 and £10.99 respectively, while the premium tier went up by £2 to £15.99. 

Netflix said that the price changes will allow it to ‘continue investing in best in class UK productions’ and ‘offer a wide variety of curated quality shows and films’ to customers. 

The UK is Netflix’s biggest production hub outside the US and Canada, with a $1 billion dollar UK production budget in 2020. 

WHAT ARE THE VIDEO STREAMING OPTIONS AVAILABLE TO UK CUSTOMERS?

Netflix 

Price: From £6.99 a month  

Hit shows: 

  • Bridgerton 
  • Squid Game 

Amazon Prime 

Price: £7.99 per month OR £79 per year

Hit shows: 

  • Tom Clancy’s Jack Ryan
  • The Boys  

Apple TV+

Price: £4.99 a month 

Hit shows

  • Ted Lasso 
  • For All Mankind  

Disney+

Price: £7.99 a month OR £79.90 a year

Hit shows:

  • The Mandalorian 
  • The Simpsons  

NOW TV

Price: From £9.99 a month

Hit shows: 

  • Game of Thrones 
  • Chernobyl  

hayu 

Price: £4.99 a month

Hit shows: 

  • Keeping up with the Kardashians
  • Made in Chelsea  

BritBox

Price: £5.99 a month 

Hit shows: 

  • Spitting Image 
  • Midsomer Murders  

Prices correct as of July 2022 

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