Netflix continues with its particular roller coaster after the first year in which the streaming ecosystem has noticed a certain slowdown, surely motivated by the unnatural growth it had during the 2020 confinements.
After announcing its first loss of subscribers in more than a decade, a few weeks ago the streaming giant was seen again in front of its shareholders. And, this time, lowering expectations worked out for them. Its share price did not suffer after publishing its second quarter earnings report. Revenue growth slowed a lot, but the platform only lost 970,000 subscribers, against expectations of a drop of 2 million.
However, its shares, also affected like all by the global economic instability, have lost a lot of value. Specifically, almost a third. If we attend to your market capitalizationvalue that is usually taken into account when undertaking acquisition offers, Netflix has gone from being worth 300,000 million in November 2021 to 100,000 now. A value that it had not had since the end of 2017.
It has rained a lot since then.
This new scenario, and the changes of direction they have taken in terms of their account sharing policy and, above all, your plan to launch a cheaper subscription with ads —something that they had discarded for active and passive— means that, for the first time in its recent history, Netflix is no longer seen as the rudder of an industry to be seen as a weather vane that tries to set the course of the air.
For this reason, although it is still an exercise in company-fiction, the first rumors about a possible sale have begun to emerge. And there, Microsoft, its unexpected partner in ad distribution, is the first candidate that comes to mind.
Netflix for sale, a huge fiction… Or maybe not
Netflix, throughout its history, has already endured other times in which its sale was considered and its leaders, with Reed Hastings at the head, discarded it. Both the well-known case of attempted purchase by block busterlike the most remote negotiations, but that took place on the part of Amazon, were at the time more or less close to ending with the independence of Netflix.
But, And the case of Microsoft? The company directed today by Satya Nadella has been trying to get a foothold in the entertainment industry for some time, either through social networks – it was interested in TikTok – or in its extensive commitment to video games that has continued with the acquisition of Activision Blizzard. Streaming would fit there, and more so with its newly activated ad lever.
Although titles like The Squid Game, stranger things Y The paper house fueling the company’s popularity with subscribers, growing competition from the likes of Disney+, Apple TV+ and Amazon Prime Video has exposed some of Netflix’s weaknesses.
In the new panorama of streaming premium television, it is no longer enough to offer content on demand. What’s more, betting everything just on content now seems like a weakness. Disney has its theme parks, its movie franchise business in theaters, its toys, and its countless brand licensing deals; Apple has its business on hardware and software; and Amazon is not only the leading e-commerce store, but also the cloud service provider for some of the biggest companies on the planet, including Netflix.
Thus, while the streaming business is being crowded out by tech giants with the ability to add ancillary value to their customers and shareholders, Netflix’s relative lack of diverse business operations has gradually transformed its profile from an early tech innovator into a business with little ability to develop. diversification.
The reasons that would make sense for a deeper purchase or alliance with Microsoft
Theme parks and computing platforms take many years to develop, so it’s unlikely Netflix will be able to quickly match its rivals’ diversified revenue streams. Nevertheless, a fast track to that diversity could be achieved through a major partnership or, more likely, the acquisition of Netflix by a behemoth like Microsoft.. The Redmond company could offer everything Netflix needs to survive against its competitors: a strong cloud architecture on Azure, and a widely used desktop and mobile software platform on Windows.
“One of the reasons we partnered with Microsoft, [es que] there are a lot of basics. They have a technical capability, which is complementary to ours, a go-to-market capability, that we need to leverage,” Greg Peters, Netflix’s chief operating officer, said during the earnings call. “We saw a high degree of strategic alignment in their interest in innovating in space and really working with us for years to come.
Additionally, Microsoft’s long-term interest in video games also dovetails nicely with Netflix’s own initiatives in recent months, where it has used video games as add-ons to increase retention of its users on mobile devices.
Who else could buy Netflix?
Also, as we mentioned at the beginning, the recent correction in technology stocks has helped make the purchase of Netflix possible.
But who else would have muscle, portfolio and interest in acquiring it? The other tech giant that has the money, cloud platform, and technology to power Netflix’s fortunes is Google.. But its recent withdrawal from original content on YouTube indicates it may be more interested in staying focused on user-generated content and the data it produces.
But now it is worth remembering that all this for the moment is nothing more than assumptions. The direction of Netflix is, for now, making it clear that it does not consider this possibility.
“We’ve done other things with Microsoft. We continue to work with them, but we’ll look at those opportunities when they exist with Microsoft, and with other companies as well.”