On the surface, Netflix’s recent stumblings could lead one to believe that CEO Reed Hastings has taken a swig of HP CEO Leo Apotheker’s crazy juice. Raising prices? Splitting off the DVD business? What kind of craziness is that? Today, one analyst issued a note saying that rather than being the crazy kind of crazy, Netflix’s moves may instead be a more sneaky and clever kind of crazy, intended to make the video service a juicy acquisition target for Amazon.
Reading through the research note by Michael Pachter of Wedbush Securities (you can read a copy here), the idea kind of makes sense: Amazon’s been trying for a long time to work its all-encompassing fingers into the streaming video market with next to no success. A Netflix buy would neatly tie that ribbon, but up until now, the DVD mailing service required that Netflix maintain a physical presence in many states around the country. A physical presence means sales tax, and Amazon’s hatred of state sales taxes is legendary. But with the Quikster spin-off, that physical presence is now removed from the streaming Netflix picture.
“We therefore concluded that there was a rational explanation for the apparently boneheaded moves by Netflix - it became clear to us that Amazon is buying the streaming business,” Pachter wrote. “…AMZN can buy without sales tax concerns (and) the split-up allows a federal income tax-free sale (stock-for-stock).”
Hm, now wouldn’t that be an interesting move? As Pachter implies in his note, it's just about the only way that Netflix's crazy moves make any sense. Amazon's name has been linked with Hulu acquisition rumors, remember...