If Microsoft has kicked off the game of who could buy Activision Blizzard, Netflix could be a surprise winner.

Image: Lipper Alpha Insight

The software giant’s $69 billion bid for the maker of “Call of Duty” is likely to run into trouble in Washington, which opens up the fray to rival bidders – particularly those who covet video game assets, and don’t face Microsoft’s (MSFT) high risk of regulatory challenges.

Microsoft agreed on Tuesday to pay Activision $95 per share in cash. That would be the Windows creator’s biggest deal ever. Yet investors are already telegraphing trouble ahead. Activision’s (ATVI) stock was trading at about a 15% discount to the offer price on Wednesday. Throw in a hefty break fee of up to $3 billion and it suggests regulatory risks are on the horizon.

While Microsoft hasn’t come in for scrutiny in the way Amazon.com, Google’s parent Alphabet, Facebook owner Meta Platforms or Apple have, it’s reasonable to think a $69 billion acquisition will raise hackles. At $2.3 trillion, Microsoft is second only in market value to Apple. The Department of Justice’s Jonathan Kanter and the Federal Trade Commission’s Lina Khan are moving away from traditional models of concentration, and are likely to test their theories in court.

That raises the possibility that another bidder could turn investors’ heads, by offering a price similar to Microsoft’s, but with less risk of arduous antitrust battles. Netflix fits the bill. Its leaders Reed Hastings and Ted Sarandos have already highlighted gaming as a priority, and singled out Epic Games’ Fortnite as a rival for viewers’ attention. Netflix (NFLX) recently launched mobile games around franchises including “Stranger Things.” Unlike Microsoft, it currently doesn’t have a full-fledged gaming business.

True, the streaming firm has huge cash obligations to fund movies like “Don’t Look Up,” and is forecast to spend more than $18 billion this year according to MoffettNathanson estimates. But with a market value of $226 billion, it could always throw in a slug of stock. Though Netflix shares have sagged recently, they’ve delivered an annual return of 30% over the past five years, almost twice the return on Activision shares.

Part of that is precisely because Netflix has shunned splashy value-destructive acquisitions. Nonetheless, Hastings and Sarandos are right to worry about the competitive threat from Activision, Epic and their peers. And the only way to win is to play the game.