Netflix is partnering with Microsoft for its new ad-supported tier

Netflix is partnering with Microsoft for its upcoming ad-supported streaming tier, the company announced Wednesday. The streaming service says Microsoft will become its “global advertising technology and sales partner” upon rolling out the cheaper option.

“It’s very early days and we have much to work through,” Netflix COO Greg Peters writes in the post. “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.”

In a post on Microsoft’s blog, the company says marketers will work with Microsoft to bring ads to the Netflix ecosystem. “Today’s announcement also endorses Microsoft’s approach to privacy, which is built on protecting customers’ information,” Mikhail Parakhin, Microsoft’s president of web experiences, says. Outside of Netflix, Microsoft is also reportedly looking into bringing ads to free-to-play Xbox games.

The Wall Street Journal reports, based on anonymous sources, that Netflix chose Microsoft over a partner for at least two significant reasons. Unlike Comcast and Google, two other companies reportedly in the running to assist with its ad build-up, Microsoft doesn’t have a video service of its own that competes with Netflix. Also, late last year, Microsoft acquired Xandr from AT&T as the telecom took apart its media stack. Xandr is an ad tech company that hopes to build technology for a “post cookie” world.

Netflix first hinted at a cheaper, ad-supported tier in May and later confirmed the possibility last month. Although Netflix hasn’t announced an official date for the tier’s rollout, it’s rumored to become available to customers by the end of 2022. The WSJ reports one option under consideration is a cheaper ad-supported version for each of the three tiers Netflix currently offers.

News of Netflix’s ad-supported tier emerged after the company revealed a decrease in subscribers for the first time in a decade last quarter, topping out at 222 million globally. The company is also exploring livestreaming and ways to clamp down on password-sharing to help mitigate a decline in subscribers and revenue.

Choosing Microsoft recalls a close relationship between the two for streaming launches. The first version of Watch Instantly that streamed mostly B-movies used Microsoft’s Silverlight technology to deliver video instead of the more common Flash Player until it was replaced by HTML5, and the Xbox 360 was the first console with an HD Netflix streaming app.

Disclosure: The Verge recently produced a series with Netflix.

Update July 14th, 2:20PM ET: Added information from Wall Street Journal.

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