The lights are on
Wedbush analyst Michael Pachter is at it again with his latest theory. He predicts that the reason Netflix split its DVD rental and digital streaming business is so that it would be easier to sell the steaming business to Amazon.“Upon reflection, it appears to us that the driver for the separation of Netflix into two businesses—Netflix.com (for streaming) and Qwikster.com (for DVD rentals) —was to position the streaming business for sale to Amazon.com,” reads an excerpt from Pachter's research on Forbes. “In our view, Amazon has always wanted to be in the streaming business, and has been constrained from buying Netflix due to tax considerations. The split up of Netflix’s business addresses the state sales tax issues raised for Amazon in having a ‘nexus.’ 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. Netflix 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, including Starz content. Netflix’s financial flexibility is quite limited, while Amazon’s is virtually unlimited.”Pachter also details tax benefits, competition elimination, and more. This theory makes a lot of sense, and blending Netflix's streaming deals with Amazon's piles of cash and business smarts could mean a lot more content for subscribers. Of course, there's no evidence of an impending deal. But it sounds like it would make a lot of sense.