Maybe Amazon Buys Netflix This Time

By Rick Aristotle Munarriz | More Articles
December 23, 2009 | Comments (6)

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Old rumors never die.

The "Amazon is buying Netflix" chatter is starting to pick up some steam.

BusinessInsider.com, Fly on the Wall, and Reuters reporter Anupreeta Das have all pointed to heavy trading activity on Netflix (Nasdaq: NFLX ) call options as the speculative root of the born again rumor.

Amazon.com (Nasdaq: AMZN ) is the logical suitor, as always.

I've been a Netflix shareholder since 2002, so I've seen plenty of these rumors come and go. However, it wouldn't surprise me to see Netflix find a way to cash out on top. Owning Netflix has been like riding a runaway train. It's fast and exciting, but it won't end pretty without an intervening force.

Yes, Netflix has done an amazing job of remaining relevant. It survived the awkward shift from DVD to Blu-ray, and it's a major force in digital delivery. This doesn't mean that Netflix will be relevant in five to seven years when discs are a memory, when every cable provider and digital media provider will have subscription offerings similar to what Netflix is championing today.

Netflix will naturally have first mover advantages. Amazon, Apple (Nasdaq: AAPL ) , and Blockbuster (NYSE: BBI ) have been struggling in selling digital celluloid. Cable giant Comcast (Nasdaq: CMCSA ) is losing video subscribers. In that time, Netflix is getting to know its subscriber base better with every passing member review. It also has a killer brand.

Netflix will fare well at first, but things will get tricky when the studios decide to deliver content directly to wired consumers, cutting out the middlemen platforms.

Is this it? Has Netflix finally decided to jump off the runaway train, at a time when the otherwise amazing Amazon has a serious void in digital video? I don't buy it. I've been here before.

However, I think it's going to happen eventually. The rumor mill isn't always wrong.

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Apple, Amazon.com, and Netflix are Motley Fool Stock Advisor picks. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz has been a Netflix shareholder -- and subscriber -- since 2002. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

Read/Post Comments (6) | Recommend This Article (18)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.

Report this Comment On December 23, 2009, at 12:00 PM, plange01 wrote:

starting to hear more talk of amazon taking failing ebay...
Report this Comment On December 23, 2009, at 8:09 PM, norman1066 wrote:

I don't think Netflix is doomed any more than any other company or its product may become obsolete. I believe Netflix will grow into a valuation at least double todays ($55) and if international expansion has any sort of traction could double again from there.
Please Mr Hastings don't sell out now you are just getting started!
Report this Comment On December 23, 2009, at 8:38 PM, Fool wrote:

Amazon.com is DOWN, as of 5 PM. It's being blamed on Walmart hackers, who have crashed the site two days before Christmas.
Report this Comment On December 24, 2009, at 9:52 AM, MG80 wrote:

I, like Rick, have held shares since early 2002, and lived through several of these rumors. This time feels a little different. I anticipate the announcement sometime in the 1st Q.
Report this Comment On December 24, 2009, at 3:00 PM, feldmail wrote:

I don't buy the scenario of NFLX becoming irrelevant. It's the same argument about the competition that has been made against NFLX forever. It's the same argument made against AMZN.
As NFLX signs up more and more digital content, they should continue to secure their position as the one-stop shop for entertainment.
Report this Comment On December 31, 2009, at 3:12 PM, Babble100 wrote:

The motivating factor is the looming battle between Amazon and Apple for digital media. Whichever grabs Netflix will gain a serious leg up in that battle.
Netflix is in the catbird seat and can play one against the other to get a sweet deal for its shareholders.

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