Netflix has picked Microsoft to help deliver the commercials in a cheaper version of its video streaming service expected to launch later this year.

The deal comes as the streaming giant fights to attract customers.

Netflix opted to develop the lower-cost offering after a disappointing first quarter in which it lost subscribers for the first time in a decade, and after years of resistance against the idea of running ads.

The ad-supported subscription will be in addition to the three options already available, the cheapest being US$10 per month in the United States.

Microsoft will be responsible for designing and managing the platform for advertisers who want to serve ads to Netflix users.

"It's very early days and we have much to work through," Netflix chief operating officer Greg Peters said.

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Adding advertising means Netflix will expose itself to some thorny issues, including debates around consumers' personal data being harvested on a massive scale to target them with more lucrative, personalised pitches.

Analysts were not surprised by Netflix's choice in Microsoft because it offers fewer conflicts of interest for Netflix than some other companies.

"Unlike the top three ad sellers in Google, Meta and Amazon, Microsoft hasn't pushed competing streaming products," analyst Ross Benes wrote.

After years of amassing subscribers, Netflix lost 200,000 customers worldwide in the first quarter compared to the end of 2021, which sent its share plunging.

The streaming giant reacted by announcing the arrival of advertising on the service, with the aim to finance the investments necessary to maintain its position as a leader after launching the streaming boom.

Netflix indicated it would get tougher on sharing logins and passwords, which allow many people not to pay to access the platform's content.

Major coup for Microsoft

Landing the ad deal with a video streaming service that boasts more than 220 million subscribers represents a major coup for Microsoft, which has been engaged in a long-running and often acrimonious battle for the past 20 years with Google.

Microsoft also may have had another factor working in its favour. Netflix's co-founder and co-CEO, Reed Hastings, served on Microsoft's board of directors from 2007 to 2012.

AFP/Reuters

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