Netflix could be ‘looking for an exit’ through ad partnership with Microsoft: Analyst
In This Article:
Needham Senior Analyst Laura Martin joins Yahoo Finance Live to break down the pros and cons of Netflix’s ad partnership with Microsoft.
Video Transcript
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- Netflix has signed on Microsoft to help support its lower priced subscription plan that's going to have ads. For more on where Netflix sits in this competitive space, let's bring in Laura Martin, Needham's Senior Analyst. And in a new note, Laura, you basically say Netflix is sort of doing this out of order, right? And that maybe Microsoft wasn't necessarily the best partner on this. Let's take that last part first. Why do you think they picked Microsoft? And what are the sort of advantages and disadvantages?
LAURA MARTIN: So let's start with the disadvantages. So Microsoft actually just bought an ad tech platform a month ago. It bought Xander from AT&T. It has never been in the third party ad tech business. So it's got to build a lot of capabilities in its SSP, it's supply side platform, in order to actually represent Netflix. Whereas, if Netflix had picked Google, or Roku, or FreeWheel, or Magnite.
Those are all third party SSP, supply side platforms today. Some of those have direct sales forces. So Netflix could have been in market much faster, probably by the end of this year. But there's going to be a lot of tech build required over at Microsoft, which just adds time.
So maybe Netflix can have more impact, and what the tech build ends up looking like, and what capabilities it has. But Wall Street really wanted ad revenue to come to Netflix faster. And it looks like Netflix doesn't have time to market as a core priority with this choice.
- Laura, you certainly caught my attention by what you wrote in your note down here, you say, quote, "A hidden agenda at play here may be that Netflix wants Microsoft to buy them." And you also point out, of course, that Reed Hastings, the Co-Ceo of Netflix was on the Microsoft board from 2007 to 2012. What's the probability of that happening?
LAURA MARTIN: Well, I mean, it could be that Netflix is looking for an exit. And all those other players that would have gotten them into advertising sooner can't buy them. They're either too small, or regulators wouldn't let Google take over Netflix, because regulators want Google to be smaller, not larger. So it could be here that really the play is that Netflix is trying to get closer to Microsoft in hopes that after Microsoft digests its Activision acquisition, it turns next and buys Netflix, which would be a complementary kind of video content, premium video content, like Activision is in the video game space.