The already warm relationship between Netflix (NASDAQ:NFLX) and Microsoft (NASDAQ:MSFT) keeps heating up. Before you know it, Netflix will be going off to meet Mr. Softy's parents.
This morning brought news that Netflix's online streaming service is being incorporated into Windows Media Center for users of the Vista Home Premium and Vista Ultimate operating systems. The service allows Netflix users to stream a growing library of digitally available DVD queue selections -- 12,000 and counting -- at no additional cost.
The Windows Media Center tie-in may not seem like a big deal. Subscribers can just fire up their selections easily enough from Netflix itself. And it's true that this development isn't on the same level as the revolutionary deals Netflix struck to work with TiVo (NASDAQ:TIVO) and Xbox 360 consoles. However, it is one more win-win symbiotic relationship between Netflix and Microsoft. Netflix lands a new way to beam celluloid to its subscribers, while Microsoft's products grow stickier.
Intentionally or not, Netflix has always played favorites with Microsoft when it comes to its stream dreams.
- Netflix was available on Windows-powered machines long before Apple (NASDAQ:AAPL) owners got in on the perk.
- Streaming for subscribers of Xbox 360 Live is a treat that owners of rival console makers Sony (NYSE:SNE) and Nintendo (OTC BB: NTDOY.PK) can't enjoy.
- The playback platform is built on Microsoft's Silverlight, instead of the more popular Adobe (NASDAQ:ADBE) Flash.
You shouldn't be surprised to find Netflix CEO Reed Hastings sitting on Microsoft's board of directors. Isn't it just a matter of time before Microsoft comes calling for all of Netflix?
Fellow Fool Tim Beyers recently suggested Netflix as a buyout candidate for Microsoft's bulging stash of greenbacks. Netflix continues to grow quickly, now with 10.3 million subscribers willing to pay for an entertainment smorgasbord. It's a well-run business with healthy profit margins. It's also a few things that have mostly evaded Microsoft in the past: hip, entertaining, and growing in digital relevance. Microsoft also has firsthand boardroom experience with Hastings, so it's probably well-versed in his astutely visionary ways.
The problem, of course, would be price. Netflix has illustrated its recession-resilient ways -- it was one of the few stocks to actually appreciate in value last year. So Netflix won't come cheap for any suitor, but being hip, entertaining, and growing in digital relevance never comes with a cheap cover charge.
Some items with immediate availability on your Netflix reading queue:
- Netflix has beaten Wall Street profit expectations in seven of the past eight quarters.
- It has kept prices in check, beyond charging a dollar more for Blu-ray access.
- Maybe this is the opportunity that you've been waiting for.
