Netflix to rely on Microsoft for its ad-backed video service

SAN FRANCISCO (AP) — Netflix has picked Microsoft help deliver the commercials in a cheaper version of its video streaming service expected to launch later this year with a pledge to minimize the intrusions into personal privacy that often accompany digital ads.

The alliance announced Wednesday marks a major step toward Netflix's first foray into advertising after steadfastly refusing to include commercials in its video streaming service since its inception 15 years ago. Netflix announced it would abandon its resistance to ads three months ago after disclosing it had lost 200,000 subscribers during the first three months of the year amid stiffer competition and rising inflation that has pressured household budgets, causing management to realize the time had come for a less expensive option.

Netflix has warned it will likely report even larger subscriber losses for the April-June period, increasing the urgency to roll out a cheaper version of its service backed by ads to help reverse customer erosion. That decline has contributed to a 70% decline in its stock price so far this year, wiped out in about $190 billion in shareholder wealth and triggered hundreds of layoffs.

The Los Gatos, California, company is scheduled to release its April-June numbers on July 19, but still hasn't specified when its ad-supported option will be available except it will roll out before 2023. Netflix's announcement about the Microsoft partnership also omitted a crucial piece of information: the anticipated price of the ad-supported option.

“It’s very early days and we have much to work through," Greg Peters, Netflix's chief operating officer, said in a post that also highlighted Microsoft's “strong privacy protections."

Landing the ad deal with a video streaming service that boasts more...