Axios Pro Exclusive Content

Netflix enlists Microsoft for ad-supported tier

Jul 14, 2022

Credit: Joshua Lowcock, @jlowcock/Twitter

By partnering with Microsoft, Netflix took a major step on Wednesday toward its ambitious goal of launching an ad-supporting tier by year's end.

Why it matters: Picking Microsoft came as a bit of a surprise, since most had expected Netflix to work with major digital ad players like Comcast and Google.

  • According to the Wall Street Journal, it was Microsoft's purchase of AT&T's ad-tech company Xandr that helped seal the deal.
  • Microsoft has lots of experience in the digital ad world, having served ads to Bing and its search engine predecessors. Last year, Microsoft generated $10 billion in ad sales.

💭 Tim's thought bubble: Unlike Comcast and Google, Microsoft also doesn't have a rival streaming player that would love to get its hands on some Netflix data.

The big picture: There are still very few specifics on what exactly advertising will look like on Netflix, which had shunned commercials for years.

  • Given Netflix's ramped-up timeline, the streaming service was always going to have to look outside to help get its advertising business up and running.
  • The next move will be to name an executive to head up its ad sales operations.
  • "It's very early days and we have much to work through," Netflix COO and CPO Greg Peters said in a blog post, nodding to Microsoft's strong privacy protections.

What's next: Netflix reports its second-quarter earnings on Tuesday after the bell. Despite featuring the long-awaited fourth season of the popular series "Stranger Things," Netflix is expecting to lose an additional 2 million subscribers.

Data: Yahoo Finance; Chart: Axios Visuals
Data: Yahoo Finance; Chart: Axios Visuals
Go deeper