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Rumor: Amazon to Buy Netflix?

July 21, 2009 | Author: Ibex Marketing

In a fascinating article in the LA Times last week, the writer speculates on rumors that Amazon might be looking to buy Netflix. Whether there’s a smidgen of truth to the gossip or not is hardly important; would this deal make sense?

It sounds like a match made in heaven to me. Netflix established and dominated the DVD-rental-by-mail industry, creating hard times for brick-and-mortar DVD rentals both large and small. (And now the little red kiosks from Redbox are kicking the storefront’s butts with $1 rentals.) Blockbuster caught onto the mail rental business, but a bit late to be anything but #2. And now Netflix has made serious progress in establishing a presence online — giving subscribers free unlimited access to a large collection of streaming movies — while Blockbuster remains stuck in the pay-now-a-watch-it-soon model for online rentals.

True, Netflix hasn’t been able to seal the deal with Hollywood to make the latest movies available for the streaming service, but imagine having Amazon’s clout to back up the negotiations. Amazon apparently doesn’t release sales figures, but I have to guess that they are one of the largest channels for DVD sales (and probably way bigger than either Netflix or Blockbuster). This would clearly introduce some leverage that Netflix can’t get on its own. And Amazon has already proven that it knows how to dominate the online retail marketplace.

A lot of good arguments have been made both for and against this rumored deal, but if I were running Amazon, it would seem like a great idea to me.