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Netflix restructures advertising partnership with Microsoft

The changes allow Netflix to charge marketers less for advertising inventory, according to the Wall Street Journal.

The changes allow Netflix to charge marketers less for advertising inventory, according to the Wall Street Journal.

The Netflix startup screen appears on a laptop computer. (Photo by Jade87 via Pixabay/Graphic by The Desk)

Netflix is in the process of restructuring its advertising business partnership with Microsoft as it tries to draw in more marketers with lower rates.

The restructuring was first reported Thursday by the Wall Street Journal, which claimed Netflix was offering marketers better deals in the range of $39 to $45 per 1,000 impressions on its low-cost, ad-supported tier.

When the tier launched last year, Netflix offered marketers between $45 and $55 per 1,000 impressions, according to earlier reporting by the Journal, which is largely based on unnamed sources.

Netflix and Microsoft announced their ad pact early last year. As part of the deal, Netflix promised Microsoft a “minimum guarantee” of ad revenue in order to limit the technology company’s financial risk, the Journal said.

Netflix has nearly 239 million global subscribers, according to its latest financial earnings disclosure. The company does not disclose how many of its customers are on the cheaper, ad-supported plan, which is priced at $7 per month in the United States and is also available in a handful of other territories.

While Netflix has seen some success in convincing existing, cost-conscious subscribers to switch to the ad-supported tier, it has been more difficult to draw new or returning customers in to the plan, which offers short commercial interruptions during programming.

To convince customers to switch, Netflix recently dropped its cheapest ad-free tier, called Basic, which cost around $10 a month. Existing Basic plan subscribers, including those who receive service for free through T-Mobile, are “grandfathered” in and won’t lose access to the tier as long as they keep their service active, though Netflix could change those terms in the future.

New customers who want to subscribe to Netflix now have just two commercial-free options: “Standard,” which offers high-definition content for $15.50 a month, and a “Premium” plan that unlocks ultra-high definition video resolution and other features for $20 a month.

In the United States, Netflix competes in the ad-supported streaming space against premium offerings from the Walt Disney Company (Hulu, Disney Plus), Paramount Global (Paramount Plus) and Comcast (Peacock), among others. It also battles for ad dollars against free streaming services like Fox Corporation’s Tubi, Google-owned YouTube, Pluto TV, Xumo Play and Amazon’s Freevee.

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About the Author:

Matthew Keys

Matthew Keys is a nationally-recognized, award-winning journalist who has covered the business of media, technology, radio and television for more than 11 years. He is the publisher of The Desk and contributes to Know Techie, Digital Content Next and StreamTV Insider. He previously worked for Thomson Reuters, the Walt Disney Company, McNaughton Newspapers and Tribune Broadcasting.
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