Every week the Opus team picks a news story or topic or idea that is relevant to the entrepreneurs and businesses we partner with.

RSS Feed

Archives

Netflix Part Deux

Ajit Deshpande - - 0 Comments

We discussed back in July that despite Netflix’s announcements of strong growth in subscriber content consumption, the going in the long run would be tough for the company in the face of competition from larger players such as Amazon, Apple and Youtube. Well, Carl Icahn seems to have decided that the time is now ripe to ‘push’ Netflix to think more seriously about its current position in the marketplace and to start evaluating its strategic options. Mr. Icahn disclosed last week that he now owns almost 10% of Netflix, mostly in the form of September 2014 call options. Despite earlier conciliatory comments, Netflix now has shown its true intentions vis a vis Icahn, adopting a poison pill to add to its existing takeover defense provisions (inclusive of staggered board appointments).

So what should we expect from Netflix going forward? If the situation turns hostile, Icahn will probably need another couple years to get his shares and to elect his proxies elected to the board, so that’s probably also the extent of how long Netflix’s end game might last. While an acquisition by Google, Apple or Amazon might make strategic sense, each of these players probably has cheaper ways to acquire Netflix’s 30 million subscribers (Hulu’s 2M paying subscribers and $2B price tag suggest a per subscriber cost of up to $1,000). Rumors notwithstanding, Microsoft might actually gain the most from a potential acquisition of Netflix, getting both a pure consumer focused play as well as a recommendation engine rivaling the best.

A once high-flying company has now become more a symbol of consolidation in the tech sector. As the behemoths continue to add pieces to their competitive war-chests, M&A exits will become even likelier than IPOs, so it will be crucial for early stage entrepreneurs to actively plan for and be cognizant of likely M&A exit scenarios.

« Back to Blog
Also on the Opus Blog

GPU Licenses from Nvidia

June 25, 2013
Ajit Deshpande - Last week, leading GPU developer Nvidia announced that it planned to start licensing its Kepler GPU technology to other chip designers for use in tablets, smartphones and other new...

The Nest Acquisition

January 23, 2014
Ajit Deshpande - Last week saw one of the largest venture-backed private company acquisitions in recent memory, when Google purchased smart thermostat and smoke detector maker Nest Labs for $3.2...

Rackspace and the Open Compute Project

January 22, 2013
Ajit Deshpande - During last week’s Open Compute Summit, Rackspace announced that it is working on designing its own servers using open-source Facebook specs. Rackspace has been involved with...

Pinterest on the rise!

September 10, 2012
Ajit Deshpande - Last week, Pinterest hit an interesting albeit purely notional milestone – that of becoming a larger source of traffic for publishers than Yahoo – in its journey towards...