Wall Street Journal says Amazon may buy Netflix
The Wall Street Journal reported Friday that the runaway success that is Netflix may have attracted enough attention from Amazon that the book and retailing giant could be considering a purchase of the popular film distributor.
Similar rumors have surfaced in the past, but Netflix continues to make itself more attractive. There are a number of factors that make them look like low-hanging fruit to a huge retailer and shipper like Amazon. Their growth rates are steadily in the thirties, and sometimes higher than that, with revenues and profits both growing steadily. Twelve million people now use Netflix to provide their film DVDs, and with revenues in the $1.5 billion range and over $100 million in annual profits, according to a CNET story, Netflix obviously has their business model in high gear.
Netflix makes all that money by being the best at what they do: distributing DVDs of films and streaming films over the Internet, to PCs and increasingly to set-top boxes. The company can currently stream to set-tops including Microsoft’s X-box, Sony Bravia, the Roku Box, and Nitendo’s Wii, putting them in direct (and successful) competition with television cable companies. As leery as film production studios are of angering the cable giants, it is hard for them to ignore the success of Netflix, and more deals are being cut with them all the time.
Amazon remains interested in an acquisition of Netflix because the latter continues to dodge the bullets fired by cable companies and operators as they continue to infringe on cable turf, and the need for the studios to listen to that gun battle, since most of studio revenue comes from big cable companies. So far, Netflix has continued to fly mainly under the radar, staying just small enough to remain out of the line of fire. If Amazon believes that they can continue to do so and still grow at the current pace, they might be the perfect buy for Bezos and company.
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