Is Netflix’s best hope an acquisition by Microsoft? | Hacker News Reader

Is Netflix’s best hope an acquisition by Microsoft?

qz.com

19 pointscwwc20 comments

>> moving into the Microsoft family would give Netflix a rapid entryway into the metaverse.

They've lost me on that. Metaverse is not even "something" and Netflix needs Microsoft to get into "metaverse".

I am tired of all these conglomerates with overlapping platforms. Seems like every big tech company offers most of {cloud storage, cloud computing, video streaming, music, payments, office software, blah blah}.

IN the old days each mega country had {car mfg, oil refining, shipbuilding, blah blah}. Now the countries totter and the megacorps compete on multiple fronts.

I posted on another recent thread about Netflix that I think they need to acquire Spotify and possibly some other companies if they want to survive. The fact of the matter is that the economics for the average guy on the street favour going with Apple One or the rumoured Google Pixel Pass rather than a bunch of different services, especially with the upcoming recession straining budgets. When times are tough do you really care that the UI of Spotify is marginally better than Apple Music if Apple Music is cheaper? Spotify Family is £17.99/month over here in the UK whereas Apple One Family is £20/month with all its other benefits. If Spotify raise their prices again over here then I think they may be toast in our market. They certainly will be for me, and I've been a customer for over a decade.

Netflix has a different problem in that, with the proliferation of new streaming services, customers who used to be paying all year round are going to turn into people who sign up once every few months when a show they care about drops to binge it and then rotate to another platform. They could mitigate it with some smart programming e.g make sure a new similar genre series drops either every month to keep people hooked or switch to episodic releases to try and draw content out between series drops. But ultimately we're heading for a world where anyone budget orientated is going to get caught up on their favourite shows and then rotate between streaming providers rather than paying all year round.

As far as I can see this only really ends with everyone in one of three camps: Apple, Google, Independent. The independents will be able to charge slightly more than the hardware behemoths but only if they offer a product that is superior enough to warrant it and I personally don't see any groundbreaking innovation coming from Netflix or Spotify any time soon. Otherwise they really need to be charging less to make up for the inconvenience of fragmented services. If they try and go it alone, they're going to see their customer bases getting gradually eroded and have to make some massive adaptations in order to survive - potentially becoming more niche and quality focused like small retail stores or coffee shops have had to become to survive against Amazon and Starbucks. If they band together then the consumer has a better justification for sticking with the brands as they currently are.

This ultimately comes down to the classic "Good, Fast, Cheap" trichotomy, more appropriately reworded in this particular instance as "Quality, Convenient, Cheap". Spotify and Netflix can't compete on Convenient (never going to beat built in integration of Apple/Google) or Cheap (Apple and Google have infinitely more money to undercut them). In a recession, more and more people are going to put an emphasis on Cheap, so they need to team up to leverage economy of scale for more affordable prices and/or massively increase the quality of the product in relation to competitors so that it is harder for the consumer to part with.

> IN the old days each mega country had {car mfg, oil refining, shipbuilding, blah blah}.

It's still the case

Is it? Shipbuilding is mostly China and Korea, with a smaller amount in Japan and Europe. Is there any non-military, non-pleasure boat construction in the US?

Australia no longer has car production. I don’t there is any in the Americas south of Mexico.

Etc. The principle of comparative advantage has wiped out a lot of mid tier industry.

While discussing who's big enough to buy Netflix, the article:

1. Failed to note market cap

2. Included a monthly graph of Netflix's stock price

3. Implied that "a major Hollywood studio" might be able to acquire it

So I'd take this with a big grain of salt.

I fail to see why buying Netflix would help Microsoft? Microsoft is currently in the process of spending billions to acquire Activision. Unless there is a streaming patent MS wants for game pass cloud, it doesn’t seem like it fits into what MS is doing right now.

Sure it would get them a spot in the streaming platforms, but I’m sure MS is already making money with azure hosting those platforms.

Maybe Microsoft is trying to get more serious into advertising(i.e compete with youtube, youtube tv).

You've accidentally hit it on the head. MS is the only major cloud provider without a video platform. Amazon has Prime and Google has YouTube.

Since they own Azure, MS can stream from it without paying anyone else a profit. This could allow them to be more competitive than Netflix can be on its own.

why would they even need to get in the streaming service anyways ? They do have gamepass which stream games and is the #1 in that area.

Because streaming makes money. In almost every industry, two big players make most of the money and the others divide the rest between them. In streaming, Netflix is a biggie. If MS owned them and cut the costs (and, hopefully, changed the content), it could be bigger. It's a theory anyway.

interesting, getting into an area of business just because "it makes money" doesn't make a lot of sense.

All of these streaming businesses need content. They are large money pits as well. Look at the spend on original content every year. What does it really drive in addition for MS ? Amazon did it as another benefit for Prime members. Google already has Youtube. Apple pushes hardware. Just curious what the net benefit for MS would be. Their xbox sells well alone, not sure if it makes a difference.

The big moneymaker in Xbox has always been content, not the boxes. At first, those were even sold at a loss. In this scenario, Xbox just gives MS another box on which to stream whatever content they offer -- and one that is not controlled by Roku or Samsung.

It could be argued that "because it makes money" is the only valid reason to go into a business. Certainly Microsoft can afford to buy any content at all that comes to market, just like Amazon and Netflix do. There's no special recipe here and in the age of cord cutting, consumers are extremely fickle about where they stream.

MS also has the unique experience of vast profits from Xbox Game Pass, another decision which has costs them millions in content acquisition (by buying studios) yet returned many more millions as profits from recurring monthly subscriptions. Sound familiar? This is Netflix's model, too, MS has shown they can already play that game profitably.

Google has YouTube, Apple has Apple TV, Amazon has Prime. Microsoft is the only trillion dollar company with no streaming service and I think they want one .

why would they even need to get in the streaming service anyways ? They do have gamepass which stream games and is the #1 in that area.

Microsoft have had several media stores over the years. They had Zune but killed it for bad reasons.

I wouldn't like the chances of Netflix or Spotify, MS are not a media services company and have shown repeatedly that this is not something their corporate structure can handle.

Doesn't look like Reed Hastings is still on the Microsoft board but he probably has the connections to make this happen.

I'm surprised the article didn't bring this up.

Last time I was on his LinkedIn profile was less than a week ago and it was showing 2017 - present. Unless he neglected to update that.

He isn’t listed on the MS website, and I think I remember him stepping down.

Probably, what Netflix needs is to build an Electronic-sell-through/Download-to-own service. Same tech. Different licensing and win over the indie/small&medium budget filmmakers.

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