Tuesday, July 14, 2009

Amazon courting Netflix?

Your first reaction may be "this makes no sense--an online retailer going after a company which rents DVDs?" But, the speculation is prevalent enough on Wall Street to have sent Netflix shares up 7% yesterday.

Here, apparently, is the logic--most believe the DVD rental business is a dying one and will be replaced by online streaming of full-length movies and TV shows. Both Amazon and Netflix are already streaming programming but Netflix has 10 million subscribers to its mail-order, rental business. All 10 million of those consumers are candidates for converting over to streaming.

Amazon currently has about 40,000 titles it can stream to customers. In Netflix, it would gain a company with 12,000 titles and some 100,000 DVD titles. The benefit to Amazon is the increased customer base plus the relationships that Netflix has with studios who own the movies and TV shows.

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