Everybody loves to speculate on when Amazon.com (Nasdaq: AMZN) and Netflix (Nasdaq: NFLX) will hook up, but this is Harry and Sally, Ross and Rachel, or Sam and Diane.
The latest chatter comes from Collins Stewart analyst Mayuresh Masurekar. According to Barrons.com, Masurekar believes that there is a "high likelihood" of Amazon rolling out a 10-inch tablet below $300 by early next year and buying Netflix's streaming business.
Everyone seems to agree that a more iPad-sized tablet is coming in a few months, so he's not really going out on much of a limb with that call. However, I'm a bit stunned that the "Amazon will buy Netflix" rumor continues to live on.
I'm a big fan of both companies, and I've owned Netflix stock for years. However, I can objectively see that Amazon no longer needs Netflix, just as I know that Netflix wouldn't punch out on the cheap.
Let's cover Amazon's reasons for buying Netflix. Is it the brand? Well, there's been a lot of ill will for the Netflix brand in recent weeks. Is it the content? Well, Amazon didn't even have an unlimited streaming service when the year began, and it's been able to go from zero to 11,000 on the title count this year.
Would Amazon love to have Netflix's 21.8 million domestic streaming customers and its more than a million international streaming subscribers? Sure. Would Amazon love to have the home theater gadget penetration? Absolutely. Is there content available through Netflix.com that Amazon would love to have? You know it.
However, at the end of the day, Netflix is striking new content deals at a healthy pace this month because studios now know that their content isn't being devalued given Netflix's new $7.99-a-month pricing. These same studios aren't going to want to be part of a freebie given to folks paying $79 a year for free two-day shipping through Amazon.com.
What would the plan be if Amazon bought Netflix? It can't just fold it into the Prime freebie, yet it's already marketing Kindle Fire on the premise of access to 11,000 video titles at no additional cost.
In short, Amazon has moved on. It has learned to live without Netflix, despite the obvious appeal on some levels.
Netflix, on the other hand, is a company that saw its stock trading for more than $300 just two months ago. Subscribers and shareholders may be upset, but analysts haven't done a whole lot of hacking away at their profit targets. In other words, the fundamentals aren't deteriorating at the same pace as the share price. Why would Netflix sell itself for anything close to today's price?
There are other buyers that actually make more sense now. Netflix CEO Reed Hastings sits on Microsoft's (Nasdaq: MSFT) board, and he's been a recent app presenter at Apple (Nasdaq: AAPL). Both of those companies have more ground to cover than Amazon, and they also happen to have enough money to make it happen. However, bidding too high for Netflix would send those stocks lower. Bidding too low won't interest Netflix.
I wouldn't necessarily be shocked if Netflix becomes buyout fodder at the right price, but enough already with making Amazon the obvious suitor. It's just not happening.
If you want to follow this saga, track the latest news by adding Netflix to My Watchlist.
