The Unexpected Alliance Netflix Just Formed
Netflix is getting serious about recouping lost subscribers and has now partnered with Microsoft to make it happen.
Netflix has had a tumultuous few months. The streaming giant has been burdened by a significant loss of subscribers which served as a factor that prompted a series of company-wide layoffs. As part of its strategy to recoup some of its lost viewers, Netflix announced it would be introducing a cheaper subscription option supported by ads. Until now, it had been unclear who Netflix intended to partner with in order to make its ads option a reality. However, the company recently announced that it has joined forces with Microsoft to offer an ad-supported version of Netflix to the public.
Microsoft was an unexpected choice and one that took many industry experts by surprise. The Wall Street Journal detailed that the top contenders were thought to be the likes of Comcast and Google. This makes sense given that those companies have well-established ad platforms. However, Netflix COO Greg Peters asserted that he was confident that Microsoft was the right choice for the company. “Microsoft has the proven ability to support all our advertising needs. More importantly, Microsoft offered the flexibility to innovate over time on both the technology and sales side,” said Peters.
The technology that Peters was referring to is the tech that Microsoft acquired after its purchase of the digital ad business Xandr. That purchase put Microsoft in a position to vie for the Netflix deal. However, that wasn’t the element that cemented the newfound partnership between the two corporations. Microsoft sweetened its pitch by promising that it has no intention to directly compete with Netflix’s streaming model in any way. The same could not be guaranteed by either Comcast or Google. It’s also worth noting that Microsoft CEO Satya Nadella himself has been and will be involved in the development and execution of the Netflix ad project.
Another factor that ultimately went into Netflix’s decision to choose Microsoft over others vying for the partnership is the company’s stringent stance on protecting consumer privacy. The other two top contenders were reportedly not as concerned with protecting the privacy of Netflix’s subscribers. “Microsoft is perceived as having a stronger privacy policy than many of its competitors,” pointed out Greg Kahn, CEO of GK Digital Ventures to the Wall Street Journal.
While the ad project between Microsoft and Netflix is officially in the works, it still remains unclear when consumers can expect to see an ad-based subscription option made available to them. “It’s very early days and we have much to work through. But our long term goal is clear. More choice for consumers and a premium, better-than-linear TV brand experience for advertisers,” detailed Peters.
Theoretically, Netflix’s new ads option would include ads that don’t abruptly interrupt the viewer’s experience. Instead, perhaps, they would ideally mold into the background for a more subtle advertising experience. At present, Netflix is also coordinating with movie studios to see how ads could be integrated into the content they generate for Netflix. Overall, when its ad option does come to fruition, it will be interesting to see the ways in which Netflix frames the advertising in relation to its content.
