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Rumor mill: Netflix would be a good fit for Amazon, but...

Options traders are betting that Amazon will buy Netflix and the idea makes a lot of sense.According to Bloomberg, Netflix shares jumped on speculation that Amazon will buy the company.
Written by Larry Dignan, Contributor on

Options traders are betting that Amazon will buy Netflix and the idea makes a lot of sense.

According to Bloomberg, Netflix shares jumped on speculation that Amazon will buy the company. The rumor at this point seems pretty thin and some analysts doubt the move because of sales tax and distribution center overlap. That said distribution centers can always be closed.

For now, the Amazon-Netflix combo may be just option pit chatter, but here are a few reasons why a deal would make sense:

  • Amazon (AMZN) gets a digital distribution strategy: Amazon already delivers content (music, books and video) digitally, but Netflix (NFLX) turbocharges the effort. The Netflix on demand streaming is ahead of Amazon's efforts.
  • Amazon understands Netflix's current business. On the efficiency front there would be no drop-off if Amazon were to consolidate Netflix's distribution centers.
  • There are savings there. That back-end overlap could be rationalized into real savings.
  • Culturally, there's a match. The companies weren't separated at birth, but both companies are customer-first operations.

Jim Friedland at Cowen writes in a research note that sales taxes, Amazon's lack of experience with large acquisitions and positioning to launch its own video on demand service argue against a deal.
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