FAQ | Netflix Ties Up With Microsoft for Advertisements: How Will It Work?

Microsoft is helping Netflix create a low-priced tier with ads, to offset Netflix's current loss of subscribers.

What exactly would this partnership mean for consumers? Here are all your queries about this deal, answered and explained.

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Microsoft and Netflix on Wednesday, 13 July, announced through blog posts on their websites that they were partnering to bring advertisements on the streaming platform. This is a departure from Netflix’s current ad-free viewing experience.

What exactly would this partnership mean for consumers? Here are all your queries about this deal, answered and explained.

What is this new tie-up between Netflix and Microsoft?

This tie-up makes Microsoft Netflix’s technology and sales partner. This means that any advertisements you see on Netflix will be put up there through Microsoft.

Marketers will communicate with the tech giant to have access to Netflix audiences and to display their advertisements on their platform.

Is every plan on Netflix going to show advertisements?

Not exactly. Netflix is working to build a lower-priced subscription tier which will have advertisements, to enable them to offer their content to more customers without losing out on revenue.

The costlier subscription plans will presumably stay ad-free. However, very little is currently known about the future ad-supported streaming plans as the deal is in early stages.

Currently, the cheapest Netflix plan is at Rs149, where content can be accessed only on the mobile/tablet app, and on a single device at a time.

Why is Netflix choosing to do this?

For the first time since launch in 2011, the company saw 2 lakh subscribers leave the service in the first quarter of 2022, and has projected 2 million subscribers leaving the service in the second quarter.

This announcement led to the company’s stocks plummeting by 35 percent – with the company considering showing advertisements.

"It's pretty clear that it's working for Hulu. Disney is doing it. HBO did it," Netflix CEO Reed Hastings said on 19 April, talking about advertising to earn revenue. "I don't think we have a lot of doubt that it works."

Is this a common revenue model for OTT?

Disney had earlier announced a deal between Disney+ and adtech company The Trade Desk. While Disney’s subscriber base is still growing, their rationale for introducing a lower-priced tier is to make their content more accessible to a wider range of consumers.

Hulu, on the other hand, offers advertisements (also owned by Disney), as does HBO Max, Paramount+ and Discovery+. However, these platforms are not available in India.

Then there are platforms like YouTube and MX Player that allow you to watch content for free, but with ads. Their subscription model offers ad-free access to their content.

A lot of homegrown OTT platforms in India offer a limited range of content to the viewer with ads for free, like ALT Balaji and Voot – and paying for these services unlocks their full roster of content.

When will Netflix begin showing advertisements?

There is no clarity on this. However, multiple reports suggest that the new plan could roll out by the end of this year.

(With inputs from Business Insider.)