Though he stayed short of providing an exact timeline for the merger, he expects it to happen in the next 18 to 24 months. The merger makes sense as, on one end, it gives Microsoft a big bang entry into the content streaming segment, on the other end, Netflix will be able to utilize the former’s massive cash reserves to produce more original content without worrying about debt obligations.
“Netflix, while a pioneer as a streaming service, doesn’t have a business model that is sustainable,” said Bibb. “For every one in two movies, one makes a significant loss while one makes a significant gain…No one has cracked the code to fix this.”
However, a Microsoft-Netflix love story is an unlikely one, given the latter’s high market valuation. Netflix shares have more-than-doubled in the trailing 12 months, and currently holds a market cap of around $140 billion.
Lack of foothold in the media content sector will haunt Microsoft in the coming years, prompting it to resort to M&A to bridge this interstice.
Many investors have been boggled by this prediction since Netflix is a synonym for cash-burn and there is a lot of uncertainty revolving around when (or even if) the company will turn profitable. In its most recent earnings conference, the streaming giant had revealed that it had borrowed almost $10 billion, and plans to spend as much as $8 billion this year to create original content.
Both the companies have not yet commented on the prediction. Microsoft shares were trading down 0.5%, while Netflix shares were down 0.7% during the regular trading hours today.