Netflix (NASDAQ:NFLX) announced on Wednesday that it had chosen Microsoft (NASDAQ:MSFT) as its global advertising sales and technology partner as the streaming company prepares to launch an ad-supported tier. “Microsoft has the demonstrated capacity to serve all of our advertising needs as we collaborate to build a new ad-supported service,” Netflix said in a statement, adding that the business provided “freedom to innovate over time on both the technology and sales,” as well as strong privacy protections.
Microsoft (MSFT) CEO Satya Nadella said in a tweet that the company is “excited” about the transaction, adding that the tech powerhouse wants publishers to have more “long-term viable ad monetization systems.” Google (GOOG) (GOOGL), Magnite (MGNI), and Comcast FreeWheel were among the companies related to the company (CMCSA).
In mid-day trading, Netflix (NFLX) surged 1.5 percent to $176.96, while Microsoft (MSFT) declined little more than 0.5 percent to $252.30. The announcement comes just a day after Walt Disney (DIS) announced a partnership with The Trade Desk (TTD) to allow for customized automated ads across Disney properties.
On Tuesday, it was revealed that Netflix (NFLX) is in talks with Hollywood studios to overhaul its content contracts as part of its new advertising-supported streaming TV alternative. Netflix is slated to release second-quarter results on July 19, and with the stock down more than 70% this year, analyst Brian White of Monness, Crespi, Hardt believes the streaming giant’s “nightmare” will continue. White, who views Netflix (NFLX) shares as neutral, observed that while the service’s content has been “excellent” in recent years, the company’s business is under threat on numerous fronts. It’s likely that the company will barely increase this quarter.
“Our [second-quarter] sales forecast reflects a 2% [quarter-over-quarter] increase, below the four-year average of up 6% for past June quarters,” White said in a note to customers. White predicts Netflix (NFLX) will earn $3.01 per share on $8.043 billion in revenue, while Wall Street experts expect a profit of $2.95 per share on $8.046 billion in revenue.
Furthermore, White stated that Netflix (NFLX) is projected to lose 2.1 million subscribers this quarter, bringing its total to 219.5 million, which is somewhat higher than Netflix’s previous projection of a loss of 2 million. 600,000 is expected to come from the United States and Canada, whereas Europe, the Middle East, and Africa should lose 1.8 million, and Latin America should lose 400,000. White predicts that Asia Pacific will add 700,000 customers, making it the only region to increase.
Netflix (NFLX) is attempting to turn around its underperforming business by announcing the introduction of an advertising-supported tier. HBO Max, Discover+ (WBD), Peacock (CMCSA), and Paramount+ (PARA), on the other hand, already have advertising-supported tiers, with Disney+ (DIS) set to do so later this year. The firm has continued to produce high-quality material, as seen by the recent surge in the viewing of Stranger Things’ fourth season, albeit boosted by supersized episodes. Other series, such as Bridgerton: Season 2 and the global blockbuster Squid Game, have also done well with audiences, and Netflix (NFLX) is building on that success with Squid Game: The Challenge, a reality show based on the hit series.
Netflix, which is seeking ways to increase revenue as its subscriber base declines, is rumored to be in negotiations with Hollywood studios about restructuring content relationships as part of a new advertising-supported streaming TV alternative. The business is said to be in talks with companies like Warner Bros about renegotiating contracts that would entail increased premiums paid for Netflix (NFLX) to run adverts alongside material from external studios. According to the Wall Street Journal, Netflix (NFLX) may have to pay an additional 15% to 30% of its current content payments for the ability to air programming on a subscription tier with advertising.
Netflix (NFLX) has stated that it is evaluating a subscriber level that includes advertising. It has allegedly informed its content partners that it hopes to launch such an offering by the fourth quarter of this year.
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