Netflix reworks Microsoft deal, lowers ad fees in bid for growth

Netflix is restructuring its advertising partnership with Microsoft and lowering ad prices in an effort to jump-start that fledgling corner of its business.

Last year, the streaming service offered customers an ad-supported option for $6.99 per month. In part because it offered to pay a "revenue guarantee," promising to deliver a sizable sum of money to Netflix, Microsoft won a competition to provide the technology for the service and sell advertisements on Netflix's behalf.

According to those with knowledge of the situation, Netflix has had preliminary discussions to sell ads through partners besides Microsoft as the new ad tier slowly gains traction. Reworking its agreement with Microsoft will allow Netflix to lower the revenue guarantee. These conditions are still being worked out.

In the meantime, Netflix is providing better deals for advertisers. According to recent ad deals, some advertisers agreed to pay between $39 and $45 per 1,000 viewers. Prior to now, Netflix charged some businesses between $45 and $55.

The reworked Microsoft agreement, combined with lower prices, could entice new advertisers who were previously on the fence to join Netflix.

Microsoft was a surprise choice for Netflix's advertising partner last summer, as opposed to Google, an Alphabet subsidiary, and Comcast. In order to reduce its financial risk, the companies' original agreement included a "minimum guarantee" that Netflix would receive a sizable infusion of ad revenue.