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”.