Netflix Inc (NASDAQ: NFLX) shares are in focus ahead of market close on Wednesday after the streaming giant finally revealed who it plans on partnering with on its previously announced ad-supported subscription plan.
Netflix partners with Microsoft Corporation
The Nasdaq-listed firm says it will rely on Microsoft’s expertise in advertising to introduce a cheaper tier that’s likely to be launched later this year. COO Greg Peters wrote:
Microsoft has the proven ability to support all our needs as we together build a new ad-supported offering. It offered the flexibility to innovate over time on both technology and sales, as well as strong privacy protections for our members.
Working with Netflix on its new offering will likely be a boost to Microsoft’s ad business that currently accounts for 6.0% of its total revenue.
Netflix is committed to subscriber growth
In its latest reported quarter, Netflix lost 200,000 paid subscribers on increased prices and rising competition. The low-cost ad-supported subscription, it hopes, will bring them back to its streaming platform. Reacting to the story on CNBC’s “Closing Bell”, Evercore ISI’s Mark Mahaney said:
There’s so many wins for Netflix in a lower priced ad-supported tier. But it is going to take time. So, I don’t think it will be material to the story and, therefore, not an investable part of the story for another year or two.
Netflix also warned in April that it could lose up to 2 million subscribers in the current financial quarter that sent its stock to the price last seen in 2017. It’s scheduled to report its Q2 results on the coming Tuesday.
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