The recent headlines reported in detail the loss of Netflix users, coupled with the streaming media giant’s agreement with Microsoft to launch an advertising support subscription layer in 2023, which triggered a new wave of speculation about whether Netflix was willing to sell itself. Some analysts want to know whether Microsoft may be a potential buyer.
It’s easy to understand why this idea attracts people’s imagination. Microsoft has run the game pass, which is often called “game Netflix”, with a similar subscription mode and a la carte demo. As far as Netflix is concerned, it has recently entered the field of game publishing and provided more than 20 mobile games for free to paying users.
If you combine the two, it will be virtually invincible at the consumer level. Even if the bundled subscription only combines some Netflix content with some game pass libraries at a competitive price, and can directly transmit it to your mobile phone or tablet through the cloud, it is an easy choice for anyone’s entertainment budget.
Technical analyst Ben Thompson wrote in a strategic update this week: “Microsoft has been looking for a way to return to the consumer field for a long time, that is, to surpass Xbox. Netflix provides this and perfectly complements the startup function of Xbox.”.
This makes sense on paper, but anyone who actively bet that it will happen seems to be overreacting because of other things that Microsoft is currently doing.
Microsoft, headquartered in Redmond, Washington, is finalizing its $68.7 billion acquisition of activisionblizzard. If the deal is completed as scheduled, Microsoft will become the third largest video game company in the world (after Sony and Tencent) and the largest single video game company in North America.
“Of course, if you asked me last year, I wouldn’t have thought that Microsoft would or would acquire Activision Blizzard.”
Although the transaction of Activision Blizzard seems to be completed smoothly, it is worth noting that the company is a company that real estate agents may call “repairers”. Activision Blizzard has released some of the world’s most valuable franchises, including call of duty and Warcraft, but the two departments of the company have their own but significant internal problems in the past few years.
For Activision, this is mainly its internal labor problem, which led its internal QA team to create the history of video games by successfully joining the trade union. Blizzard is largely seen as a significant decline, accelerating recent revelations about its extremely toxic workplace culture.
When Microsoft takes over Activision Blizzard, its first step will be a major and long restructuring and liquidation period, otherwise in the long run, the acquisition is not worth it at all. Unlike other recent high-profile video game acquisitions by Microsoft, this is not a situation where Microsoft can simply change the names on all stationery and make way. A lot of work needs to be done to make Activision Blizzard reach the position it needs.
In addition, as Thompson pointed out in strategy, the recent transaction with Netflix has made Microsoft one of the largest advertising companies in this field, because Microsoft can reach millions of potential captive audiences. If Netflix’s advertising support layer can establish any type of audience, Microsoft will benefit a lot from this cooperation.
This shows that Netflix, as an independent partner, is now of great value to Microsoft because it enables the company to expand into a new field. Microsoft will endanger this in the near future, which means nothing to me.
Finally, Netflix is famous for running on Amazon Web services. Traditionally, Microsoft is not too uneasy about working with companies that appear to be competitors, such as the release of minecraft on Sony and Nintendo platforms.
It’s hard to imagine whether job one will transfer all its energy to its azure cloud services after Microsoft theoretically acquires Netflix. It’s hard to know how long this will take, but in addition to Netflix’s own asking price (its market value is close to $100billion), it will also add a lot of costs to the acquisition, and it has a non-zero opportunity to make the whole transaction fail.
Among these three factors, I think logically speaking, it is not feasible for Microsoft to open up another front in the content war. The recent major acquisitions are still in progress, and the Netflix transaction itself has a lot of influence. The acquisition of Netflix will bring many attendant complex problems, which even Microsoft level companies do not need now.
Of course, if you asked me last year, I wouldn’t have thought that Microsoft would or would acquire Activision Blizzard. Theoretically, the acquisition of Netflix is much more expensive than that transaction, but that doesn’t mean it’s impossible, especially if Netflix’s share price falls sharply again.
However, for now, I think if Microsoft is in the direct market of any streaming video service, it will pursue smaller products than Netflix, and it will not do so in the foreseeable future.