Microsoftis currently aggressively acquiring video game studios for its Xbox subsidiary. The pace of acquisitions has slowed somewhat due to the ongoing acquisition of Activision Blizzard, in part due to the publisher’s size and the amount of international oversight involved. But one analyst believes thatMicrosoftcould have an even bigger acquisition in mind. They believe that once Activision Blizzard closes, Microsoft may consider exploring the possibility of acquiring video streaming service Netflix.
Needham senior analyst Laura Martin recently spoke with Yahoo! Finance regarding a recent ad agreement that she believes conceals a “hidden agenda” between the two companies. Martin explained that a new partnership between Microsoft andNetflix, where Microsoft delivers ads for Netflix’s ad-supported streaming service tier, belies a bigger plan. She believes this is the start of a long-term process that could result in Microsoft acquiring Netflix.
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Two key pints are brought up by Martin in her breakdown of the situation. The first is thatNetflix chose Microsoftas its partner for advertising for reasons other than Microsoft being the best option, saying that Microsoft is inexperienced in the ad-tech business and that it may disrupt Netflix’s launch plans for the ad-supported tier of its service as a result. Basically, if Microsoft is actually a poor partner choice for what’s supposed to be a significant, company-changing product offering, then Netflix must have another priority for choosing Microsoft.
The second point Martin brings up is that Microsoft is the only partner Netflix could have chosen capable of making the acquisition at all. That’s because Netflix is, even after its value dropped significantly in 2022, a very valuable company. As such, onlyMicrosoft has the cash on handfor the purchase and is capable of building out the ad technology necessary for Netflix’s new service.
The amount of cash that Microsoft reportedly has available as of the end of March 2022 is nearly $105 billion, enough to cover the estimated $100 billion price tag of Netflix even before financing. Martin’s guess that Netflix could be attempting tolure Microsoft into an acquisitionis certainly possible financially. The bigger question is whether Microsoft would be interested in the opportunity.
Microsoft is undeniably open to further acquisitions. For every month it doesn’t spend its cash, that cash is worth less due to inflation. But whereas acquiring game studios, an industry rapidly growing in value, has been a very lucrative investment,Netflix’s futureis very unpredictable. Expanding into streaming would also draw accusations of monopolistic behavior in a way acquiring more game studios wouldn’t. While Netflix’s partnership withMicrosoftis certainly eyebrow-raising for several justified reasons, only time will tell whether there’s more to the situation than meets the eye.
