Amid a flurry of breathless speculation put forth this week by analysts, the possibility that Netflix is partnering with Microsoft for ulterior reasons of M&A has certainly come up.
But Needham senior analyst Laura Martin stands out as being particularly bullish on this possibility.
“Netflix is trying to get closer to Microsoft in hopes that, after Microsoft digests its Activision acquisition, it turns and buys Netflix next,” Martin told Yahoo Finance Live.
Netflix announced earlier this week that it will work with Microsoft as its global advertising technology partner as the streaming service rolls out an advertising-supported tier.
Martin believes there were better options available to Netflix. The other companies it spoken with — which include Google, Roku and Comcast’s FreeWheel — all have fully developed supply-side platforms (SSPs). For its part, however, Microsoft is still in the process of integrating Xandr, the SSP it purchased from AT&T late last year.
Netflix, which said it would launch a partially ad-supported tier by the end of 2022 in order to spur its flagging subscriber and revenue growth, has also yet to announce any senior advertising executive hires. The key vendor decision should have come after those personnel additions, Martin said.
For his part, former Netflix technology architect David Ronca, who now heads video tech at Facebook, noted that Netflix's streaming backbone was originally built on Microsoft software, including Windows Media and ActiveX.
Regardless of its Wall Street struggles and lowered market capitalization, Netflix turning to a trusted tech partner isn't necessarily a direct link to a $100 billion M&A deal.
However, given the business factors cited, Needham predicts that Netflix won't be able to arrive to market with an ad-subsidized iteration until at least mid-2023.
“It looks like Netflix doesn’t have time to market as a priority with this choice,” Martin said. ▪️
