Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money

79% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

FREE EBOOK

How to Day Trade Stocks & Indices

  • Place your first trade
  • Identify 9 chart patterns
  • Pro strategies step-by-step

You'll also receive our newsletter and other Opto emails in accordance with our privacy policy.

Updates

Is Netflix Making A Huge Mistake?

The more I look into this Microsoft (NASDAQ: MSFT) deal to buy TikTok, the less it makes sense to me. It reminds me a lot of the same problems that were apparent when the CEOs of Apple (NASDAQ: AAPL), Alphabet (NASDAQ: GOOG), Amazon (NASDAQ: AMZN), and Facebook (NASDAQ: FB) were grilled (virtually) on Capitol Hill a couple of weeks ago. 

This article was originally published on MyWallSt Investing for Everyone.

Though well-meaning, some of the committee clearly had no idea what they were talking about when it came to tech, and this inexperience showed. In other words, they didn’t understand the technology enough to ask the right questions. 

That’s how I feel about Microsoft trying to buy TikTok. Don’t get me wrong, Microsoft’s an incredible company and a wonderful investment opportunity, but it’s not exactly ‘down with the kids’, is it? Sure, many of us grew up endlessly entertained by Windows’ ‘Paint’ feature, and our parents seem to love them, but the TikTok generation is a whole different beast; one which I don’t believe Microsoft is suited to tame. 

And then there’s Netflix (NASDAQ: NFLX). 

 

Why Netflix is a better option than Microsoft

This is a long shot but hear me out, as I am far from the first person to spout this theory; Netflix would be a far more suitable candidate for buying TikTok’s U.S., Canadian, Australian, and New Zealand operations. 

 

1. Nothing is signed yet

First off, the Microsoft discussion is far from a done deal. President Trump has set a September 20 deadline on discussions, and though it wasn’t present at the recent Big Tech hearings, Microsoft is not absolved of antitrust breaches just yet. Only last month, Slack (NYSE: WORK) requested that the European Commission investigate Microsoft for its anti-competitive practices via Teams, and there’s a good case. 

 

2. Antitrust and the China problem

Which brings me to my next point. Netflix is never in the discussion when antitrust is involved. Sure, it is dominant in the streaming market, but its closest rivals are Disney (NYSE: DIS) and Amazon, companies with far more diversified offerings — and in Amazon’s case, worth a lot more.

As for ongoing tensions between the U.S. and China, the U.S. government clearly does not want close ties between U.S. data-heavy companies and the communist country. Microsoft has more than 20 years’ worth of investment and exposure to Chinese markets, with the company’s largest non-U.S. R&D center established in the Asian country. Netflix, on the other hand, has no exposure to China, does not even offer its product there. 

 

3. Seamless integration

The one thing that Netflix is missing from its business model is advertising revenue. The Wall Street Journal has estimated that TikTok could bring in up to $6 billion in ad revenue by next year, which would blow even Roku (NASDAQ: ROKU) out of the water. Such an acquisition would ensure that Netflix will open up a brand new and lucrative revenue stream whilst maintaining the ad-free integrity of its core streaming service. 

Not only that but Netflix, unlike Microsoft, is a consumer-facing business through and through, and appeals far more to a younger audience than Microsoft does. It is much less likely to interfere with TikTok’s winning formula and simply let its two products complement each other, especially when it can now advertise new Netflix releases on the world’s hottest tech startup free of charge. With access to 100 million U.S. users, suddenly that market wouldn’t seem so saturated anymore. 

 

Can Netflix afford to buy TikTok?

In the words of Morgan Stanley (NYSE: MS) Vice Chairman Robert Kindler: “if you buy an asset on the cheap, it doesn’t matter if the deal has synergies.” TikTok is a golden ticket right now, but with some analysts putting its value as high as $30 billion, it would be a far bigger risk to $213 billion Netflix than to $1.6 trillion Microsoft. It would also find itself under a much more watchful eye from regulators, but such is the cost of success.

 

 

This is a no-brainer and represents Netflix’s greatest ever building opportunity to-date. In one fell swoop, Netflix could wipe out one of its biggest threats and cement itself in the advertising game. If it really wants to step up to the big leagues and reach the heights of some of the other names in Big Tech, it needs to get aggressive with Microsoft and pull every trick in the book to at least worm its way into the discussion. Perhaps it will, or perhaps CEO Reed Hastings already saw the disaster of short-form content-maker Quibi and wishes to avoid the same fate.

 

MyWallSt makes it easy for you to pick winning stocks. 

Start your free trial today — it's the best investment you'll ever make.

MyWallSt is a maker of financial investment tools designed to transform anyone into an informed, confident investor. With our award-winning apps and investing services, we'll show you how to get started and beat the market. 

Learn more here.

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

Continue reading for FREE

Join the 40,000+ subscribers getting market-moving news every week.

Written by

Free ebook

Tricks of the trade: 7 interviews with the world’s top traders

Get it now

Related articles