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In order to provide users with a less expensive subscription option that includes advertisements, Netflix has partnered with Microsoft.
The industry leader in streaming claims that the service will be an “addition” to its current subscriptions, which are free of advertisements. However, how much the business intends to charge customers for the new service is still a secret.
After reporting its first subscriber decline in more than ten years and making hundreds of job cuts earlier this year, Netflix made the announcement. Between January and March, it lost 200,000 users as opposed to the 2.5 million analysts had predicted the company would gain during that time. Additionally, Netflix anticipates losing an additional two million subscribers between April and June.
The business announced that it had chosen Microsoft as its exclusive global sales and advertising technology partner to launch a “lower priced ad-supported membership plan.”
Netflix has never desired advertisements. The foundation of its entire business strategy was monthly subscriptions. However, Netflix officials were forced to disregard their policies. It follows horrendous data that revealed the corporation was losing subscribers. Additionally, as a result of the high cost of living, households have had to tighten their budgets and have begun to consider ending their Netflix subscription as a potential option to save money. This, according to reports, has made investors uneasy.
In addition, Netflix faces stiff competition from services like Apple TV, Disney+, HBO Max, and Amazon Prime. There aren’t enough paying subscribers to go around, and there are too many possibilities. In order to react, Netflix is developing a less expensive version that will include advertisements and will launch later this year. A similar business strategy is used by Spotify, which offers free music in exchange for watching ads.
It is hoped that by accepting commercials, Netflix can draw in more customers. However, the move also demonstrates that advertisements, which high-end streaming businesses formerly considered to be so antiquated, are still very much in use today.
The Wall Street Journal reported on Tuesday that Netflix is attempting to restructure its contracts with other entertainment companies so that it can include advertisements in its service.
According to reports, the company has talked with Sony Pictures Television, Universal, and Warner Bros.
Warner Bros. opted not to respond, and Universal or Sony did not immediately answer a BBC request for comment.
Netflix’s market value was reduced by $50 billion in April after the firm revealed the unexpected decline in subscribers, the first since October 2011.
The business reported losing 700,000 users as a result of shutting down its service in Russia, despite having gained millions of subscribers during the COVID lockdowns. Competitor competitiveness and individuals sharing their Netflix credentials with others were also blamed.
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The business announced 300 job losses last month as it struggled with the decline in consumer volume. Additionally, Ted Sarandos, co-CEO of Netflix, stated last month that the company was in discussions with several businesses to discover methods to appeal to price-conscious customers.