A favourite fantasy mergers and acquisition game is to predict who will eventually acquire Netflix. It may not make much financial sense, but strategically it is more a matter of alignment and adjacency. Through that lens, a closer relationship with Microsoft does not seem out of the question.

Netflix is due to announce its subscriber numbers for the close of 2022. It has forecast a global gain of 4.5 million for a total of 227.59 million.

Netflix lost subscribers in the first two quarters of 2022, albeit only just over a million. That resulted in a dramatic fall in its valuation, from which it is still recovering, with stock trading at around half its peak price, giving it a market capitalisation approaching $150 billion.

The 25-year-old company could still become an acquisition target. One company with the ability to acquire Netflix and a rationale to do so is Microsoft, with a market cap approaching $1.8 trillion.

An opinion piece prediction from Reuters in late 2022 suggested that it is easy to believe Microsoft will set its sights on Netflix, prompting renewed speculation.

Microsoft is seeking to acquire games company Activision Blizzard for $69 billion, a move that is facing competition issues on the grounds that it would give the producer of the Xbox too much control of the games market.

Microsoft wants to become the Netflix of computer games. Netflix is seeking to expand from movies and television shows into games and has been buying up games studios. A combination with Microsoft could be a win for both parties.

Netflix went with Microsoft to sell advertising for its lower-cost subscription tier, following the acquisition of advertising and analytics company Xandr by Microsoft from AT&T. This might suggest other synergies.

Acquiring Netflix could be a way for Microsoft to achieve its long-held media ambitions.

Microsoft previously tried to get into the television market with its Microsoft TV initiative, latterly Mediaroom, which proved to be an expensive experiment, subsequently acquired by Ericsson and now part of the MediaKind offering.

Reed Hastings, the co-founder and co-chief executive of Netflix sat on the Microsoft board from 2007 to 2012.

Brad Smith, the vice chair and president of Microsoft has been on the board of directors of Netflix since 2015.

While Netflix could continue as a standalone business, it is most likely to realise its value through acquisition, no doubt at a premium.