Passive Guy figured we were all out of Amazon news for awhile, but he was wrong.
From MarketWatch, a story that may or may not have any substance:
After a week in which Netflix Inc. shares shed more than 38% of their value, one of Wall Street’s most-bearish analysts raised his rating on the company, saying Netflix could be setting itself up to sell its online video-streaming business to Amazon.com Inc.
Michael Pachter, of Wedbush Securities, lifted his rating on Netflix’s stock to outperform, or the equivalent of buy, from underperform on Thursday morning. Pachter also raised his price target on the stock to $155 a share from $110.
Pachter’s reasons had to do with Netflix’s recent controversial plan to split into separate business operations for its DVD rentals and online video rentals, and specifically, what he sees as an effort to make the video-streaming business look appealing to Amazon for a potential buyout.
There’s “a method to their madness,” Pachter wrote in a note to clients.
Pachter said that Amazon has always wanted to be in the video-streaming business, but has been hampered by tax considerations due to state sales tax issues. Most states require companies that have physical operations in those states to collect sales taxes on transactions done within those states.
Amazon has so far been able to get around most of those sales-tax issues by virtue of its being an online retailer. Pachter said Amazon would likely have had to begin collecting state sales taxes had it purchased Netflix outright because that company has a wide network of distribution centers across many states.
However, Pachter said a separate video-streaming business from Netflix is more appealing to Amazon, as the company could still avoid enforcing the state sales taxes, and dramatically increase its own video offerings.
“If Amazon were to acquire only Netflix’s streaming business, it could triple the size of its content library, and gain traction as an industry leader,” Pachter said. “Netflix’s streaming has current content deals that provide it with access to movie content during the premium cable TV window, and Amazon has the financial resources to secure additional streaming rights.”
Link to the rest at MarketWatch
I would welcome a purchase of Netflix streaming by Amazon.
After reading this—[click the link and scroll down to “From the Office: Amazon is Nobody’s Friend, Part One”]—I am anything but surprised.
What I find most interesting about this is that it makes the universally-panned split between Netflix and Qwickster make perfect sense and look arguably like good business.
Agreed, Rich. It’s the only theory I’ve read that makes the split anything but a totally stupid business move.
Interesting.
I’m buying stock in earplugs for the “The sky is falling” screeching sure to ensue if the deal goes to fruition.