Netflix partners with Microsoft on an ad-supported subscription plan

Netflix Named Microsoft As its partner in the ad-supported service, the companies announced Wednesday.

“Microsoft has a proven ability to support all of our needs as we together build a new ad-supported offering. Most importantly, Microsoft has provided the flexibility to innovate over time in both the technology and sales side, as well as strong privacy protections for our members,” said Greg Peters, COO of Netflix, In a statement.

Stranger Things, which has been struggling to retain and add subscribers, announced in April that it plans to roll out an ad-supported category after years of resisting the move.

Co-CEO Reed Hastings has long been opposed to adding commercials or other promotions to the platform, but said during the company’s pre-recorded earnings conference call that “It has a great meaningTo provide customers with a cheaper option.

Read more: Netflix announces Stranger Things

The show has a lot of revenue potential for Netflix as it signes up more users. In an effort to attract more subscribers, Netflix has increased its spending on content, particularly on originals. To pay for it, the company raised the prices for its services. Netflix said these price changes help boost revenue but were partly responsible for the loss of 600,000 subscribers in the US and Canada during the last quarter of a year.

Netflix has been interviewing potential partners over the past several months, including The Google And the ComcastIt is preparing to launch the category before the end of 2022.

Unlike Google, which owns YouTube, and Comcast, which owns NBCUniversal’s Peacock, Microsoft does not operate a competing streaming service to Netflix.

Peters said the advertising effort is still in its “very early days” with “a lot to work through.”

Netflix is ​​set to announce its quarterly earnings Tuesday. It had previously warned that it could lose two million subscribers during the second quarter. Netflix shares are down more than 70% since the start of the year.

The new work is a boon for Microsoft’s advertising division, which contributes 6% of the program’s total revenue.

The Bing search engine, where Microsoft gets revenue by displaying ads in search results, isn’t as popular as Alphabet’s Google, and in 2015 Microsoft exited the display ad market as Aol took over that unit.

—CNBC’s Sarah Whitten, Jordan Novett, and Alex Sherman contributed to this report.