Satya Nadella could be speculated to buy Netflix in 2023, adding to his list of new businesses under Microsoft’s aegis.
How come?
Since his 2014 promotion to the top, Nadella has been on a costly shopping spree inaugurated with the $2.5-billion purchase of “Minecraft”, the wildly popular block-building and adventure game.
Then it went on to buy LinkedIn for $26 billion and the speech recognition and artificial intelligence software developer Nuance for $20 billion.
Gaming major Activision Blizzard emerged as the largest disclosed target at $69 billion.
Netflix still on top
At present, Microsoft is busy fighting U.S. trustbusters for the right to absorb the “Call of Duty” creator.
Even if Nadella loses out on the deal due to competition reasons, owning Netflix would still make strategic sense and probably be an easier sell in Washington and Brussels.
There is an existing relationship here.
Long sight on video games
Netflix chose Microsoft as its advertising partner for a new advertising-supported subscription service.
Microsoft President Brad Smith sits on the Netflix board.
One of the reasons behind the deal would be that Microsoft wants to offer a video-game streaming service over multiple devices.
But Netflix has its own big plans in gaming.
This year, co-led by Reed Hastings Netflix snapped up developer Spry Fox, its sixth in-house studio.
Becoming part of the Microsoft brand would only serve to supercharge those ambitions.
The business and financials
A bundle with streaming TV and games together can be imagined to be one of its future offerings.
With a market value 13 times that of Netflix, as of early December, $1.8 trillion Microsoft should have no issue grabbing Netflix.
A 30% premium would value the Netflix enterprise at nearly $190 billion.
However, significant cost savings may come hard to find.
Nadella offers prospects
On top of that, 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, however, has defied such quick financial logic before.
On top of that, he has shown a willingness to be a bold dealmaker.
So, factoring all that in, it’s easy to believe Microsoft will set its sights on Netflix.
