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The Netflix headquarters in Los Gatos, California
The Netflix headquarters in Los Gatos, California © AP

Netflix is partnering with Microsoft to build an advertisement-supported tier of its streaming service, as it races to offer a cheaper option for consumers amid tough competition and soaring inflation.

The streaming service, which had reportedly been speaking with potential partners, chose Microsoft because it “offered the flexibility to innovate over time on both the technology and sales side, as well as strong privacy protections for our members”, according to chief operating officer Greg Peters on Wednesday.

Netflix chief executive Reed Hastings had in April announced the company would create an advertising-supported version of its service. The news came as a surprise as Hastings had previously been staunchly against ads, describing Netflix as an advertising-free zone that allows viewers to “relax” without being “exploited”. 

The push into advertising is part of Netflix’s aim to reorient itself for leaner times. It has lost two-thirds of its market value since November, and analysts have likened its fall to the dotcom crash.

Disney, the other giant of the streaming business, also recently said it would launch a cheaper, ad-supported version of its service.

Netflix and Disney have the same goal: to add more subscribers. Their challenge is to ensure that the ad-supported option does not drain away too many full-price customers, while also reaching enough people to attract advertisers.

Netflix has not disclosed what the service would cost, or other details about the product. “It’s very early days and we have much to work through,” said Peters.

Read more about Netflix’s decision to work with Microsoft here.

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