Digital Download

Netflix chooses Microsoft to launch ad-supported tier

INDIANAPOLIS (WISH) — One of the world’s biggest streaming services is pairing with one of the world’s leading tech companies on a new endeavor.

Netflix CEO Ted Sarandos announced last week that it would partner with Microsoft to launch its upcoming ad-supported subscription service.

Microsoft’s ad business is enjoying newfound attention after the announcement, according to Nelson Spade, general manager of Circulus Digital Media, WISH-TV’s full-service digital agency and sister company.

Spade says Microsoft’s advertising world actually goes back to 2007 when it bought a Seattle-based company called AQuantive.

“It actually turned out to be a big, a big failure for Microsoft, but it’s fought its way back,” Spade said. “It’s not usually a top-of-mind name when it comes to digital advertising space. They’re actually fourth in the country, about $9 billion annually, behind the likes of Amazon, Meta, and Google. Keep in mind, they’re a distant fourth. Google tops out at north of $70 billion annually.”

Over the last year, Microsoft has indicated it wants to get back into advertising in a more serious manner, according to Spade.

“In January, they bought a company called Xandr from AT&T. It’s a big trading platform for digital advertising. It really paved the way and made this Netflix partnership even possible,” Spade said.

A partnership between Microsoft and Netflix will be mutually beneficial, Spade says.

“Microsoft has an established history when it comes to tech, obviously advertising as well — it’s got a half-a-billion dollar search business. It’s got gaming revenue coming in from its free-to-play Xbox games,” Spade said. “Netflix is the number one subscriber-based content streaming service in the world. So, right there is a first synergy: Microsoft has this tech, but they don’t have content to apply it to. Netflix has never been in the advertising space previously and, after it lost one million subscribers in the first quarter, they made the decision to get into a mixed model. So that’s the synergy.”

There’s already chatter that this partnership could turn into something bigger, like a merger, according to Spade.

“It might be time for them to have an exit strategy from the subscription game and they’re looking at this opportunity with Microsoft being very synergistic, potentially, down the road for both parties,” Spade said.

To watch the entire segment, click on the video.

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