Even former Netflix hater Whitney Tilson has had a change of heart. After being a notorious short-seller, he's added a position to his portfolio. One of his reasons? It could be a buyout candidate. His hunch got a serious bit of credit today when rumors circled that Verizon
Obviously, it's much easier to buy a brand than it is to spend all the time and cash to build up a strong reputation, and when it comes to streaming movies, Netflix is still the biggest household name. Sure, there is competition from Apple
Picking up the Netflix name would give Verizon instant access to the largest membership base of wireless video subscribers worldwide. If it really is serious about getting into streaming, this is the way to do it.
Deep pockets write checks
The biggest problem facing Netflix beyond a few PR bungles is the cost of content. Its severing of relations with Starz removed many of the most valuable movies from its library, and showed that the cost of content isn't as cheap as it once was. This opened it up to deep-pocketed rivals like Apple and Amazon who have the means to basically buy whatever content they want.
With Amazon's Jeff Bezos being notoriously patient and willing to play the ultra-long game, it wouldn't surprise me if he were willing to buy a ton of content and run the streaming segment at a loss in order to slowly siphon users from Netflix until it rolled over and died.
Enter the knight in shining armor, Verizon. With its nearly $11 billion in cash and short-term investments, it has almost 30 times the idle cash that Netflix does, cash that could be easily dispatched to ramp up Netflix's library with the best content. Coupled with Verizon's massive $5.1 billion in free cash flow for the most recent quarter alone and you can see there really isn't much content they couldn't buy.
Speak now, or forever hold your peace
So would a marriage between Netflix and Verizon be a good one? I think so. As mobile devices increasingly dominate our landscape, people will want access to their media whenever and wherever. Considering that Verizon just spent $3.6 billion on spectrum licenses that will let it cover 259 million Americans, or basically the whole population, I'd say it's well-positioned to do just that. While this is still in rumor-mill stage, I'm very excited to see how it plays out.
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Editor's note: A previous version of this article noted that Whitney Tilson profited from his original short position. While his stance was vindicated, he covered his position before the drop and did not realize a profit.