- Recent headlines revealing membership losses at Netflix as well as the company’s advertising arrangement with Microsoft to offer an ad-supported subscription tier in 2023, have spurred a new wave of suspicions that the streaming platform may be eager to sell itself. Is Microsoft buying Netflix?
- Analysts speculate whether Microsoft could be a potential bidder.
- Since 2014, when he was promoted to the company’s corner office, Nadella has been on a spending spree.
- The U.S. Federal Trade Commission filed a complaint on December 8 to prevent Microsoft from purchasing video game maker Activision Blizzard for $69 billion.
- The objective of a partnership involves Microsoft’s intention to offer a streaming service for video games on many platforms.
A new wave of rumors: Is Microsoft buying Netflix? Netflix might be willing to sell itself due to the recent membership losses as well as the company’s advertising agreement with Microsoft to introduce an ad-supported subscription tier in 2023. Analysts are speculating as to whether Microsoft would be a potential bidder. Satya Nadella consistently offers bigger ideas. The CEO of Microsoft has been acquiring new companies at a remarkable rate. In 2023, expect him to include Netflix on the list.
Is Microsoft buying Netflix?
Since being elevated to the company’s corner office in 2014, Nadella has gone on an expensive buying binge. It all began with the $2.5 billion purchase of the Minecraft game’s developer. Later, Microsoft paid $26 billion for LinkedIn and $20 billion for Nuance, a maker of speech recognition and AI technologies. With a target value of $69 billion, Activision Blizzard was by far the most publicly disclosed.
Microsoft is actively defending its right to acquire the company behind “Call of Duty” against American trustbusters. Its proximity to the video game system Xbox has given rise to regulatory worries about market domination. However, even if Nadella is unsuccessful in acquiring the video game company due to competition, owning Netflix would be a wise strategic move and probably be more popular in Washington and Brussels.
The two businesses already work closely together. For a brand-new subscription service that is supported by advertising, Netflix selected Microsoft as its advertising partner. Brad Smith, the president of Microsoft, is a board member of Netflix as well. The goal of the deal includes Microsoft’s desire to provide a video game streaming service across various devices.
Netflix has ambitious gaming plans of its own. The business, co-led by Reed Hastings, acquired developer Spry Fox in 2022, becoming its sixth internal studio. Actively engaging with the Microsoft enterprise would advance those goals. It is simple to imagine a bundle that includes both streaming TV and video games.
As of the beginning of December, Microsoft had a market value of $1.8 trillion, which is 13 times that of Netflix. With a 30% premium, the Netflix company would be worth around $190 billion. It would be challenging to find significant cost savings, though. Additionally, according to Morningstar analysts, the estimated return on investment would only be half its 8% weighted average cost of capital after taxing the $8 billion in operating profit that analysts expect Netflix to generate in 2024.
Such back-of-the-envelope financial reasoning has previously been denied by Nadella. He has also demonstrated a willingness to strike risky deals if nothing else. Given that, it’s understandable why Microsoft would target Netflix.
Microsoft, does it really make sense?
The U.S. Federal Trade Commission filed a lawsuit on December 8 to stop Microsoft’s $69 billion acquisition of video game developer Activision Blizzard, claiming that the move would harm consumers by giving the software company an unfair advantage over rivals in the market for Xbox gaming consoles and cloud gaming.
Of course, if you had asked us a year ago, we wouldn’t have believed Microsoft was capable of purchasing Activision Blizzard or that it would. Although a hypothetical acquisition of Netflix would be far more expensive than that transaction, it is still imaginable, particularly if Netflix’s stock price experiences another substantial downturn.
Back to our original question, Is Microsoft buying Netflix? For the time being, though, we would anticipate that if Microsoft were to enter the direct market for any streaming video service, it would target a service that was less popular than Netflix.
