From the rumor mill: Netflix to merge with Amazon?
According to an article on Business Week Online, Amazon has been rumored to have offered Netflix a 50% premium to buy the company, $42 a share, or $2.2bn. Neither company has commented on the rumors.
This comes from the school of “if you can’t beat ‘em, buy ‘em.” Wal-Mart and Block Buster have both failed to make a dent in Netflix, Wal-Mart giving up the ghost before things got really ugly and BB practically bankrupting itself in the effort to compete. As of yet, Amazon has not started an online DVD rental service in the U.S. They’ve seen the writing on the wall. But a service like Netflix is also in direct competition with Amazon’s DVD sales. The more Netflix customers there are, presumably, the fewer people will be buying DVDs on Amazon.
However, a $2.2bn price tag might be setting the bar a little high. Netflix has forecasted 20,000,000 subscribers in the next 5-7 years, but that’s certainly not set in stone. Either way, it will likely take Amazon 20 years to make up the difference.
Finally, it may also be more valuable to wait a couple years before making Netflix an offer, because the competition from Comcast and other On Demand video purveyors may drive prices down once again. Also, it may not be Amazon making the offer; it might be a cable operator.