Netflix is making strategic moves in its advertising partnership with Microsoft for its lower-priced ad-supported subscription plan, as reported by the Wall Street Journal on Thursday.
The streaming giant launched the $7-per-month plan with commercials last year in 12 markets, including the US, to attract more customers.
Microsoft was chosen as its technology and sales partner, partly due to its revenue guarantee offer.
However, the agreement is now being reworked to reduce the revenue guarantee, reflecting the slower growth of the ad tier.
Netflix executives express frustration over Microsoft’s failure to sell more ad inventory.
As a result, Netflix is exploring opportunities to sell ads through other partners and offering them more favourable deals.
According to ad buyers, some advertisers have agreed to pay Netflix around $39 to $45 per 1,000 viewers in recent deals, a decrease from the previous range of $45 to $55.
While Netflix and Microsoft have yet to respond to Reuters’ request for comment, this move comes on the heels of Netflix reporting lacklustre revenue growth last week.
Co-CEO Greg Peters cautioned that returns from new initiatives would take “several quarters” to materialise, raising concerns about the company’s path to sustained growth.
As the streaming landscape continues to evolve, Netflix is adjusting its advertising strategy to stay competitive and capitalise on new revenue streams.
