Could Amazon buy Netflix?
One analyst says the video-rental company may have split itself up to pave the way for an acquisition.
It's an amazing drop for the one-time market darling. And many observers are shaking their heads in disbelief, since this company normally executes flawlessly. Now its executives look like boneheads.
What happened to Netflix?
Post continues below video:
The company has infuriated users and investors by deciding to split its DVD business off from its streaming-video side. The DVD-by-mail business will be renamed Qwikster and have a separate website and billing system. Netflix shares were up 1% Thursday in midday trading to $129.82.
Why would Netflix split its baby down the middle like that? One analyst thinks something bigger is afoot here. Michael Pachter with Wedbush Morgan says that sloughing off the DVD business might suddenly make Netflix an acquisition candidate for Amazon (AMZN). Shares of Amazon fell nearly 3% in response.
Say what? Let's hear him out. Amazon already streams videos for members of its Amazon Prime service, but it doesn't have nearly the library or the active users that Netflix does. Amazon Prime is rather pathetic compared with Netflix, in fact.
Pachter thinks Amazon could buy Netflix and immediately become the market leader.
There's some logic to this. The competition for the online viewer is ratcheting up among Amazon, Apple (AAPL), Hulu.com and other sites. Buying Netflix would immediately shoot Amazon to the top.
And this ties directly in with the tablet computer Amazon is reportedly developing for later this year. Amazon will really be able to go after the iPad if it has Netflix as a major content source for the tablet.
But I suspect Amazon would rather go it alone without Netflix. For one thing, buying Netflix would be incredibly expensive. The company has huge licensing costs to boot, and it's unclear whether Netflix can sustain enough members to pay for those.
Amazon is working out its own licensing deals, albeit slowly, and will do so on terms that it's comfortable with. Also, Amazon has been busy setting up its own streaming infrastructure, and it's done so at the expense of profit. Every quarterly earnings report shows how much Amazon is spending on building out its pipeline.
Amazon has already laid out its own foundation and is more than capable of negotiating its own streaming deals with Hollywood. It doesn't need to buy Netflix. In fact, the way Netflix is going, Amazon may end up beating the company anyway.
Sadly I think Netflix best days are behind them. I used to love Netflix as an alternative to the customer unfriendly Blockbuster, but now they are just another greedy corporation. To raise prices in a recession by that much was just suicidal, forcing customers to either pay more, pay less, or cancel.
I think what they have found is most prefer to either pay less or cancel which is going to kill their next quarterly numbers. I also think the real reason they made the change was because they know they are at risk of being outbid on contracts by companies with much bigger wallets. Losing Starz and paying $100M for "House of Cards" were huge mistakes.
if netflix woulda started accepting debit cards or green dot cards they would had made their profits,netflix only accepts major credit cards or bank cards with a bank account.netflix does not accept pre-paid cards.hmmm all those potential customers.
MORE ON MSN MONEY
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
Try as the bears might, they couldn't break U.S. stocks. But investors still face frothy prices and considerable headwinds.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.