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ddting (89.51)

Netflix for sale? (NOT Qwikster?)

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September 20, 2011 – Comments (3) | RELATED TICKERS: NFLX , GOOG , AMZN

OK my turn to weigh in on Netflix... Here's a thought. What if Hastings split up the company to sell Netflix, i.e. the streaming part of the company, not Qwikster? This would make a ton of sense to companies like Apple, Amazon, or Google. Best bet in this scenario would be Google. They have the cash (they offered $6 billion for Groupon for crying out loud). They'd have no interest in DVDs. All of Netflix has a market cap of $6.8 billion, assume the Qwikster part is like half, that means Netflix itself would be $3.4 billion. Can you see Google offering up $6 billion to buy Netflix? 

Just an outside the box thought...

3 Comments – Post Your Own

#1) On September 20, 2011 at 11:17 PM, ikkyu2 (99.45) wrote:

Netflix has nothing of value for an acquirer.  They have a unique, quirky, growth oriented corporate culture, which an acquisition would destroy as key talent fled.  They have a variety of contracts for rights to streaming media which are not particularly exciting, nor exclusive, and they were contracts negotiated by Reed Hastings, so an acquirer would have no reason to believe that they would be able to obtain similar contracts in future.  Some of these may even void on an acquisition.
And they have a customer base which is already royally pissed off.  Another disruption to subscriber service wouldn't change that.  Apple and Amazon are already trying to build a base of content users, by the way; they'd have to think they've failed to want to try to buy Netflix's customers, many of whom are also their streaming customers already.

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#2) On September 21, 2011 at 11:49 PM, walt373 (99.86) wrote:

Check out this article that makes Netflix's culture sound more like a culture of fear.

I thought selling the streaming business could be a possibility as well. I'd say it's probably the biggest risk as a short. The streaming business is currently uneconomical and it would be a big win for Netflix if they could sell it to someone for a good price.

On the other hand, Apple and Amazon have invested a lot in streaming already and I think it might be easier to just continue building out their own systems than trying to integrate Netflix. And as for customer acquisition, I'm inclined to think they will at least wait a few quarters to see how bad the Netflix sentiment gets, so short term I'm not too worried. It would also make sense to wait a bit and see if they can get lucky again - maybe Reed Hastings will make another apology video.

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#3) On September 22, 2011 at 8:43 AM, ddting (89.51) wrote:

Saying Netflix has nothing of value is like saying Wal-Mart has nothing of value because it doesn't sell any of its own products. Netflix has distribution - it still has 24 million subscribers. Companies would kill to have that, much less pay for it. Sure in theory it's easy to sign a contract and stream videos, but the execution of it is the hard part... an Netflix has done the work andspent the money to acquire their 24 million subscribers.

Fair point in saying contracts might not be valid for an acquisition. I don't have the details on that.

Another reason why this might make sense... any acquirer can come in and be the good cop in all this. Imagine Google buying up Netflix and say "OK enough is enough. There's a new sherrif in town, we're going to make things right for Netflix customers."

And they just bought 24 million subscribers.

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