Netflix reworks its advertising agreement with Microsoft for a better deal and favourable terms.
Netflix is altering its advertising agreement with Microsoft for its lower-cost, ad-supported subscription plan and decreasing ad prices.
The streaming service rolled out the $7-per-month plan with ads last year in 12 markets, including the US, to increase its customer base. Microsoft was chosen as the technology and sales collaborator for this plan, partly due to its promise of a revenue guarantee.
However, with the growth of the ad-supported tier slowing down, Netflix is now adjusting the agreement to lower the revenue guarantee. There is a growing sentiment of dissatisfaction among company executives regarding Microsoft’s ad inventory sales.
Moreover, Netflix has begun exploratory talks to distribute ads through other partners besides Microsoft, proposing different terms.
In recent transactions, some advertisers have agreed to pay Netflix around $39 to $45 per 1,000 viewers, a drop from the earlier range of $45 to $55, according to ad buyers.
Last week, the video-streaming service reported a slight revenue increase, leading to concerns about a longer path to growth from its new strategies. Co-CEO Greg Peters indicated it would take “several quarters” to see returns from these efforts.
Netflix’s Ongoing Efforts to Increase Revenue and Subscribers
Previously, Netflix had discontinued its $9.99 ad-free basic plan in the US and UK. This transition from the “Basic” plan signifies Netflix’s increased commitment to its ad-supported tier, which costs less than $6.99 monthly.
According to their recent earnings release, Netflix closed the second quarter with 238 million subscribers and achieved a profit of $1.5 billion.
Netflix added nearly 6 million subscribers in Q2 of 2023, as reported in its Q2 2023 earnings calls. In May, Netflix implemented a password-sharing crackdown for accounts in the US, UK, and over 100 other countries. It is suspected that, as a result of this measure, the streaming giant saw an increase of nearly 6 million new subscribers in the second quarter of 2023.
Netflix also dropped the restrictions in India by stopping the password-sharing options and implementing the Netflix household concept, where only the users of the primary household can access the Netflix account. It stated that launching low-tiered price plans would motivate users to purchase a subscription.
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