The pandemic is continuing to disrupt business models that once appeared unshakable. One prime example of this transformation is Netflix, which continues to move towards introducing an advertising-supported tier of service. Remember, at one point, most movie theatres did not show advertising on the premises, with the notion that customers came to theatres to enjoy the movies and the movies alone, without the distraction of commercialism.
Under intense pressure from investors, Netflix is mapping out a new path forward that incorporates advertising in order to maximize its revenue opportunities. This week, the world’s largest streamer announced that it will partner with Microsoft to sell advertising for its platform, rather than building up an in-house team.
Both Comcast and Google had also been in the running to become Netflix’s advertising partners, each with an extensive history of success in online ad sales. It has been reported that Netflix chose Microsoft because it offered significantly more favorable terms than other potential partners. Wall Street responded positively, with Netflix stock bounding upwards after the announcement of its new partnership with Microsoft.
Meanwhile, Netflix continues to pour billions into creating high-profile new content for its platform, including blockbuster action films such as RED NOTICE and THE GRAY MAN, each film having cost more than $200M to produce. It’s still unclear whether these huge investments will entice a significant number of new subscribers to sign up for the service.
‘Netflix Thinks Exactly Like an Old Movie Studio’ (The Atlantic)