Netflix Will Be Next On Microsoft's Shopping List (reuters.com) 77
Satya Nadella keeps thinking bigger. Microsoft's chief executive has been buying new businesses at an impressive clip. Look for him to add Netflix to the list in 2023. Reuters reports: [...] The two companies are already closely aligned. Netflix chose Microsoft as its advertising partner for a new advertising-supported subscription service. Microsoft President Brad Smith also sits on the Netflix board. Part of the rationale for a deal is that Microsoft wants to offer a video-game streaming service over multiple devices. Netflix has its own big plans in gaming. In 2022, the company co-led by Reed Hastings snapped up developer Spry Fox, its sixth in-house studio. Becoming part of the Microsoft empire would supercharge those ambitions. A bundle with streaming TV and games together is not hard to fathom.
With a market value 13 times that of Netflix, as of early December, $1.8 trillion Microsoft can afford Netflix. A 30% premium would value the Netflix enterprise at nearly $190 billion. Significant cost savings would be hard to find, however. And after taxing the $8 billion of operating profit that analysts project for Netflix in 2024, the implied return on investment would only be half its 8% weighted average cost of capital, per Morningstar analysts. Nadella has defied such back-of-the-envelope financial logic before. And if nothing else, he has shown a willingness to be a bold dealmaker. On that basis, it's easy to believe Microsoft will set its sights on Netflix.
With a market value 13 times that of Netflix, as of early December, $1.8 trillion Microsoft can afford Netflix. A 30% premium would value the Netflix enterprise at nearly $190 billion. Significant cost savings would be hard to find, however. And after taxing the $8 billion of operating profit that analysts project for Netflix in 2024, the implied return on investment would only be half its 8% weighted average cost of capital, per Morningstar analysts. Nadella has defied such back-of-the-envelope financial logic before. And if nothing else, he has shown a willingness to be a bold dealmaker. On that basis, it's easy to believe Microsoft will set its sights on Netflix.
MS' usual MO. If you can't build it, buy it (Score:1, Troll)
Microsoft's usual MO. If you can't build it, buy it.
Re:MS' usual MO. If you can't build it, buy it (Score:5, Informative)
It's worth noting that this entire story is speculation on the part of some blogger/reporter.
Re: (Score:3, Insightful)
It's worth noting that this entire story is speculation on the part of some blogger/reporter.
Could be someone who needs to sell some of their Netflix stock to buy Christmas gifts. Pretty sure a pump-and-dump gets you put on the naughty list, though.
Re:MS' usual MO. If you can't build it, buy it (Score:4, Insightful)
Re: (Score:2)
Apple and Amazon did build their own streaming platforms, so why can't Microsoft do the same? They already have enough IPs to make videogame-related shows and movies for decades to come.
Re: (Score:2)
I don't think any of those are predominantly due to acquisitions, although some stuff rolled into "server products" probably were.
DOS (Score:4, Informative)
Re: (Score:2)
Re: (Score:1)
Re: (Score:3)
Microsoft's usual MO. If you can't build it, buy it.
What sort of moron statement is that? that is every companies MO. funnily enough MS has probably built more than it has bought, at least in its big revenue items.
Re: (Score:2)
You say that, but it's another thing they stole from Apple.
The idea that Netflix is (Score:5, Insightful)
And don't bother to try and convince me that Lunix, Open-whatever-office, and all those alternatives are equally good. No, they aren't. The alternatives are for rich people, people who can't afford 50 bucks worth of software, and people who enjoy talking about the "sheeple". for the other 98% of humanity, microsoft is inevitable. I'm a fan of mac and ios, but at least I'm honest enough to admit that there's no getting away from MS.
Re: The idea that Netflix is (Score:4, Insightful)
Re: The idea that Netflix is (Score:5, Insightful)
You are making an assumption that "Markets" are sane and rational. They are not. Entire textbooks are written on irrationality of markets. The value of something is not just what an irrational actor thinks it is.
If you think Microsoft is under valued buy thier stock... or if Netflix is over valued short it...
People need to stop making silly suggestions. The former is a good financial advice. The latter is not. Just because you think something is over-valued is not a reason to short something. Shorting is nothing like buying shares and carries with it an incredible exposure to risk. Your advice may be good to a gambling addict sitting at a roulette table, and they may take you up on your offer, but it is not sane for any normal person to do.
Re: (Score:2, Interesting)
One of these companies makes the worlds dominant OS....
It's only dominant in the one area in which Microsoft obtained, maintained, and continues to maintain an illegal monopoly that has been ignored around the world. That monopoly was illegally leveraged into a productivity monopoly. Even Steve Balmer at one point said that if Microsoft didn't control the Windows API, Microsoft would have died a long time ago from it's bad software.
...the hands-down worlds best productivity suite....
I presume you're talking about that terribly painful-to-use Microsoft Office. Everytime my work laptop opens a Microsoft Office do
Re: (Score:3)
maintain an illegal monopoly that has been ignored around the world
Monopolies aren't illegal. That is why it has been ignored around the world. No countries have laws against monopolies existing.
That monopoly was illegally leveraged into a productivity monopoly. Even Steve Balmer at one point said that if Microsoft didn't control the Windows API, Microsoft would have died a long time ago from it's bad software.
That is a more rational phrase, except ... the productivity monopoly started to be developed at a time when Microsoft did not have an overwhelming monopoly position, in fact it started when there was fierce competition with Lotus. And the ol' phrase "DOS isn't done until Lotus won't run" is an example of something that would be illegal IFF you were a monopoly.
Everyone has their preference, and it's fine if yours is Microsoft Office, but pretending that it's clearly superior is laughable to me.
Agreed, but having a p
Re: (Score:1)
Monopolies aren't illegal.
That's why I called it an illegal monopoly. Having a monopoly is not illegal, but using that monopoly power as a wedge toward obtaining another one is illegal. That's what Microsoft did: used its operating system monopoly to enable its quest for productivity software monopolies.
By the time the Lotus debacle occurred, Microsoft most definitely had an operating system monopoly. It just wasn't recognized as such since antitrust enforcers were asleep at the wheel.
Even if we assume, for rhetorical purposes, that
Re:The idea that Netflix is (Score:4, Insightful)
The idea that Netflix is worth 10% as much as Microsoft is laughable.
Microsoft made $200 billion in revenue this year, and Netflix made $30 billion in revenue. Seems like Microsoft being 10x the value of Netflix isn't that out of line. Microsoft has far more successful products and services. Somewhere around 10x as many it seems, since their market valuation is 10x that of Netflix.
10% is a small fraction of 100%. It is the difference between a $500k salary and a $50k salary. Your comments about Microsoft being far more valuable than Netflix and the fact that Microsoft is worth 10x Netflix can both be true.
Re: (Score:2)
I don't disagree with your assertion but worth noting: revenue is a metric often focused on by an irrational market. The share of revenue between Netflix and Microsoft is far greater than the share of actual profit. 10% vs 8% is a solid basis for an argument. 10% vs 20% is a little more shaky.
Focusing on revenue is what leads to people to pay $44bn for a social network that historically has only ever lost money.
Re: (Score:2)
Focusing on revenue is what leads to people to pay $44bn for a social network that historically has only ever lost money.
Another set of factors: hubris, stupidity, and "I alone can fix it" thinking. All of which applied to the transaction you reference.
Nobody that has a clue would have paid anywhere close to $44B for Twitter. And they would have gone through due diligence in order to bring that price down significantly.
Re: (Score:3, Interesting)
MS has been unable to leverage its monopoly desktop to other platforms. It completely lost the mobile industry. The combined sales of video game consoles is less than the PlayStation 2.
MS is now a legacy company with no innovative product for the marketplace. It has licensing fees and not much else.
Re: (Score:2)
It is possible for Microsoft to not ruin stuff they've purchased: I submit exhibit A. [github.com]
However, the trend is for them to ruin stuff they buy, so your bet isn't wholly against the odds.
Re: (Score:2)
Microsoft hasn't ruined GitHub yet. Give it time. :-)
Re: (Score:2)
If products alone dictated stock value then you may have a point. However, there are countless examples where that clearly doesn't wash with company valuations.
Your logic would cause an investor to go broke.
What will they change? (Score:5, Interesting)
If Microsoft buys Netflix with the intention to introduce more advertising, they will lose me as a customer.
I've been a Netflix subscriber since near the very beginning of their streaming service around early 2008. I've witnessed the quality of the service deteriorate over time as the catalog was intentionally made difficult to search and filter.
There is a lot of good Microsoft could do here if they were to focus on quality of service and customer satisfaction. While it is true that filtering features such as removing titles you've already seen or displaying only newly added or updated content reduces satisfaction for the average customer; these features should not be unavailable to customers like myself. I do not take an interest in the vast majority of content aimed at children. Netflix opted to become a babysitting service and began adding more and more of this content while removing adult content during 2010 - 2020. Censorship increased significantly with censored versions (my God, a nipple! it's the end of the world!) followed by censored cuts removing whole "potentially offensive" portions of media.
Originally it seems Netflix's credo was to provide uncensored, unmodified, pure video streams and high quality text format subtitles. At some point that came into conflict with maximizing profit.
Will Microsoft turn Netflix into a further child-safe walled kindergarten? Will it become XBox Live? Or will it become better than the decaying stump of itself that remains?
Re: What will they change? (Score:2)
Re: What will they change? (Score:5, Insightful)
I'll stop using "streaming" services and continue to buy the content directly in formats such as blu-ray, rip them to disk, convert to mkv with text-format subtitles and re-write them to my own unprotected disks.
Text format sub-titles were supposed to be supported, but are in fact almost never supported on the blu-ray medium. Most blu-ray titles use image overlays like DVD did.
Re: (Score:2)
Amazon video has already surpassed Netflix in subscriptions.
Re: (Score:2)
Re: (Score:1)
There is a lot of good Microsoft could do here if they were to focus on quality of service and customer satisfaction.
Personally, I never really had an issue with Netflix's quality of service. My partner and I ditched 'em after they removed everything we used to watch (Trek went to Paramount+, I'm not sure what happened to Stargate*, and I think all the shows he used to watch went to Hulu and Disney+). I don't really see Microsoft going twelve rounds with other studios to regain the rights to content Netflix has lost over the years (and that seems even more impossible now that every major studio now has their own streami
Re: (Score:3)
I suppose it's possible you did not notice the issues. If for example you're looking for particular content, especially in cases where it was recently removed from the service, you'll find yourself wasting exorbitant amounts of time and effort to discover that fact. The platform has no file-system-like features to sort and catalog titles according to your own preferences. It has a single flat list you can use for "favorites", but what
Re: (Score:2)
It is interesting to read your reply and some like it, as it answers some questions that were mysterious to me. My family has had a Netflix subscription for 10-12 years, wife and kids use it, but I never watch it - and I mean never. I am content with my cable lineup (Cox), and in the past 3-4 years I have enjoyed some things on CBS/Paramount and Disney+.
But about a year ago, after plugging an Amazon Firestick into my desktop TV, I added myself as a user on the Netflix account. So, for the past year, I ha
Re: (Score:2)
and I have been unable to discern what the hell "all the fuss is about" that made them popular. The offerings seem slim. I cannot figure out how to do intelligent searches.
That's because almost everything that made Netflix great is now gone. I only subscribe because I get it for free from T-Mobile for some reason. Otherwise, I would've dropped it years ago.
Re: What will they change? (Score:2)
Re: (Score:1)
Stargate is on several services. I think Amazon and Apple, and a couple of the free ones.
Amazon is just as bad when it comes to things getting removed. They actually pulled Defiance while I was in the middle of watching it. Pretty much the only things you can count on sticking around are the original series, and I can't honestly say I'm a big fan of any of Netflix or Amazon's attempts at getting into show biz. TBH, if Amazon offered a cheaper Prime tier sans streaming, I'd jump on that in a hot second.
Re: (Score:2)
I believe these are licensing issues. I'm not sure what type of non-disclosure Netflix agrees to with regard to licenses apart from standard good faith conduct re: contracts. In my opinion, it absolutely stinks that Netflix doesn't give us more information about licensing terms and their negotiations.
For example every title should ideally have additional hidden information associated with it. An "experts" mode might enable additional features that include the display of this information. This could allow us
Re: (Score:2)
Stargate is on several services. I think Amazon and Apple, and a couple of the free ones.
Amazon is just as bad when it comes to things getting removed. They actually pulled Defiance while I was in the middle of watching it.
That's a feature. Kidding but I only made it through Season 1.
Re: (Score:2)
Re: (Score:2)
SG-1 left Netflix a few weeks ago and is supposedly leaving Prime in 10 days. This is particularly baffling, given that Amazon owns SG-1 as of earlier this year, with their acquisition of MGM....
I once bought the complete SG-1 and Atlantis collections on DVD. It took me four sets [gatwood.net] of SG-1 DVDs to assemble a single complete set that had no defective DVDs. And that was after buying and returning an additional three sets, for a total of seven....
Factoring in those data points, I'm starting to think there mu
Re: (Score:3)
Re: (Score:3)
New services for employers to be announced soon (Score:2)
Re: (Score:3)
They'll just automatically post your watchlist to your linkedin account, for everyone to see.
bsod (Score:2)
Great, now my Roku will start showing me the BSOD when the Netflix app crashes.
Dear Santa... (Score:2, Insightful)
So, this random columnist named Jennifer Saba thinks that Microsoft might eventually have an interest in buying Netflix, and... that's newsworthy?
Re: (Score:2)
Its a Reuters link up there, but you know she is thinking "I made it onto Slashdot!"
Re: (Score:2)
Re: (Score:2)
Where else can you walk among old trolls?
Opinion (Score:2)
Re: (Score:2)
I suppose they could pre-install Netflix on every Windows PC, while also making Netflix only work with Windows. And they might get really serious about fighting media piracy via built-in Windows anti-piracy restrictions, when it affects the Microsoft/Netflix bottom line.
Re: (Score:1)
making Netflix only work with Windows
That would kill Netflix. Netflix usually runs on smart TVs, set top boxes, phones and tablets. PC use is a very marginal case.
Re: (Score:2)
Worse than Yahoo. (Score:2)
Microsoft Buying Netflix is even more stupid then the Yahoo bid. Especially at 190 billion.
You would be literally buying a name of a shell company for B Movies with a business model that's in a death spiral at best due to the movie industry creating their own streaming products. The only advantage they have (besides Stranger Things reruns) is they still have overseas contracts with movie studios, which once they expire, will be replaced by that movie studio's own streaming service.
Pure speculation (Score:3)
The article doesn't quote anyone as saying Microsoft will try to buy Netflix. There are no actual announcements or reported moves that lead to the conclusion. Just an author's speculation, with a very confident-sounding "will buy."
owning Netflix would make strategic sense and probably be an easier sell in Washington and Brussels
It "makes sense" to the article author anyway. Maybe it does, but that's far from leading to an actual purchase.
Oh Goody. Let's trash another company (Score:1)
Microsoft f*cks up just about every company they take over. Let's watch it happen again.
$190 Bill ?!? Netflix is LAME (Score:2)
I haven't watched anything original that is interesting in a couple of years.
We keep it because my Wife and Daughter like some of the past content.
Fuck that (Score:1)
EOM
I'm Ahead of the Game (Score:2, Interesting)
I ditched Netflix ages ago.
This story is everywhere (Score:3)
And it is completely fabricated. There are no sources, and there is not even a proper analysis.
Let me put this out there: it does not make sense.
Netflix is valued $128 billion. These deals usually ask for a premium, so they would want something like $150 billion.
Microsoft's cash on hand is slightly over $100 billion. So that means, they need to raise an additional $50 billion either from debt (bond sales), or stocks (sale or exchange). In any case, they would put on a major risk in these economic winds. Especially when they are actually doing well, Netflix is *not* doing well, and losing blood day after day, and yet Netflix stock is still extremely over priced.
Any consultant, accountant, or manager who considers this deal, should not be in that organization.
(And of course Microsoft could still surprise us, and do it).
#CancelNetflix (Score:2)
No (Score:2)
Afford (Score:2)
With a market value 13 times that of Netflix, as of early December, $1.8 trillion Microsoft can afford Netflix.
This summary doesn't specify how much of their own company shares they have in their treasury to spend. Probably don't know that's a thing that matters.
Please, don't (Score:2)
diversification is so hard (Score:2)
I started buying into NFLX this year in an attempt to diversify away from my holdings in MSFT and TSLA.
Guess that didn't work.
two evils (Score:1)
So if you want to stream will have to pick between two evils: Microsoft and Disney.
Oh goodie (Score:2)
Another reason to dump Netflicks.