In brief: Microsoft's next acquisition could be its largest to date, and we're not talking about Activision Blizzard. In a recent financial commentary piece, Reuters argues that Microsoft's next major target could be Netflix, and they make some compelling points.
Netflix recently partnered with Microsoft to power its new ad-supported subscription tier, which appears to be off to a slow start. According to recent data from analytics firm Antenna, just nine percent of Netflix sign-ups in the US in November were for the Basic with Ads plan, making it the least popular of all plans offered.
Furthermore, Antenna noted that only 0.1 percent of Netflix's existing US subscribers switched to the ad-supported plan last month.
For what it's worth, Microsoft President Brad Smith also holds a seat on Netflix's board.
With Netflix under its umbrella, a single bundle with streaming movies and TV as well as loads of games would make a lot of sense. Microsoft is already deeply entrenched in the gaming market with Xbox, and Netflix continues to build its gaming foundation.
Just last week, the streaming giant added Twelve Minutes and Kentucky Route Zero to its library of freebies for subscribers. Teenage Mutant Ninja Turtles: Shredder's Revenge and a game based on Netflix's own Vikings: Valhalla are coming in early 2023.
Netflix has also been scooping up game studios to build its base, the latest of which - Next Games - was acquired earlier this year for $72 million. In September, Netflix also announced it would be building a new studio in Finland.
Microsoft has the money to make a deal happen, too. As of writing, Microsoft has a market cap of $1.82 trillion which is more than 13 times that of Netflix. Share value is up for both companies on the prediction.
Microsoft's decision to pursue an acquisition of Netflix could depend on the outcome of its ongoing effort to secure Activision Blizzard. If it gets shot down, Microsoft would have even more money and attention to divert to whatever comes next. Should the merger gain approval, it would only make a potential future mega bundle even more attractive.