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    Tech

    Microsoft and Netflix are rumored to join as streaming competition heats up.

    Regulatory barriers have prevented Microsoft from acquiring Activision Blizzard (ATVI), which would have been the most expensive acquisition in gaming history at a cost of $69 billion.
    NxtvertexBy NxtvertexDecember 23, 2022Updated:December 23, 2022No Comments3 Mins Read
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    Under the creative leadership of CEO Satya Nadella, Microsoft (MSFT) has participated in a number of acquisitions, and rumours suggest Netflix (NFLX) may be the next.

    Since July 2022, the two businesses have collaborated to power Netflix’s new ad-supported membership service.

    Regulatory barriers have prevented Microsoft from acquiring Activision Blizzard (ATVI), which would have been the most expensive acquisition in gaming history at a cost of $69 billion. It might therefore have access to these cash in 2023 to use elsewhere.

    Given that the price of Netflix’s shares has dropped about half over the past year, a good offer might be difficult to refuse.

    However, some would counter that the shares are not inexpensive in the increasingly congested streaming market. The shares are currently trading at $298, returning to their pre-pandemic levels, before receiving the boost from global Covid lockdowns encouraging people to stay at home.

    Benefits to Microsoft

    Since being hired in 2014, Nadella has made it apparent that his goal is to increase Microsoft’s influence throughout the spectrum of the tech sector.

    Under his leadership, Microsoft purchased Mojang, the Swedish game developer behind Minecraft. Then, it bought GitHub, LinkedIn, and Xamarin.

    Activision Blizzard (ATVI), a gaming business best known for Call of Duty and Candy Crush, has recently caught Microsoft’s attention. The computer giant has made a $69 billion purchase offer, but regulatory resistance stems from problems with competitor Sony’s licencing (SNE).

    The extra funds may be used in other ways if the acquisition is unsuccessful, and Netflix seems like a solid option for the internet giant.

    Benefits to Netflix

    The original streaming service has struggled in recent months to maintain profit growth. After a historically significant performance in 2020, Netflix’s decline has been swift and brutal.

    While all streaming services experienced growth in 2020, Netflix did not, while competitors like Disney (DIS) did.

    In 2022, it reported a drop in revenue and a loss of subscribers for the first time ever. The expansion of Netflix into Asia was one of its growth bets, but it doesn’t seem to have brought in as much money as it might have planned. It recorded an 18% increase in revenue this year.

    The Netflix platform has plans to add a paid subscription tier in an effort to retain revenue, which may just have a negative impact on viewership numbers or may just be the key to returning to the 20% to 35% growth rates the firm was able to accomplish in its early days.

    The other strategy put up by Netflix is to broaden the gaming offerings it presently offers on a limited basis to users of its mobile apps. Its objective is to leverage games to lengthen Netflix viewing sessions. This gaming goal could be further by collaborating with Microsoft.

    The chatter about a tie-up, according to AJ Bell Investment Director Russ Mould, “looks more like fantasy M&A than a credible story, and one can imagine that it would be difficult to persuade many Microsoft shareholders that they should own a content platform that, by its own admission, is finding it harder to sustain previously strong growth levels.”

    Mould acknowledges that the proposal might work out well if shareholders join in, though. “While Microsoft has the material and wants to reach a wider audience, Netflix wants to provide a thorough streaming solution for games. In terms of strategy, the two businesses might mesh well.

    But Microsoft would have to do some serious digging. The market value of Netflix is approximately $133 billion at the current share price, which is nearly twice what it has bid for Activision Blizzard.

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