

Why should Amazon buy Netflix - horatiumocian
http://www.marketwatch.com/story/amazon-netflix-an-ma-idea-resurfaces-2011-05-06

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pchristensen
Ooh, ooh, ooh! I love "Amazon should buy Netflix" articles. It's the HN
equivalent of "first!" to say that Amazon won't buy Netflix because it would
give them a business nexus in a lot of states and require them to collect
sales tax there. Ergo, never gonna happen, at least not without some financial
sleight of hand like the $175 million "investment" in LivingSocial.

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TomOfTTB
Well...I hate to be this blunt about it...but if Amazon were to buy Netflix it
would be to get their subscribers and to get their content licenses. Since any
merger would take time and netflix has already said it plans to do everything
in its power to move away from shipping DVDs.

So since Netflix is already running on AWS and Amazon is already maintaining
their infrastructure there wouldn't be much need for Amazon to take on
Netflix's employees or physical assets.

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seb
They would probably loose the content licenses. The contracts between the
content holders and Netflix says probably something about a right to cancel
the contract in case Netflix is bought.

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badmash69
A long tome ago when I was an MBA student, I asked my prof and peers why does
company X buy company Y, when both X and Y are healthy companies, in the
context of techology companies. The most common answer is "synergy" or cost
savings . But my point was that if acquirer is a mature company and acquiree
is a young startup, the young startup would have a higher growth rate than the
mature company. Also the young startup would have more freedom than a mature
public company, whose decisions making would be rigid as they are driven by
the quarterly earnings expectation. It seems to me that the savings /synergy
would be dwarfed by the dampening of the growth rate of the startup. Not to
mention that the startup would bleed talent as they move on. Consider Cisco
and Flip : Flip stopped innovating and taking risks after the acquisition and
was eventually killed off. I understand Netflix is not a startup but they are
just as scrappy and I believe their best products are yet to come. Yahoo has
also acquired so many companies and I do not believe they managed to achieve
their goals at all( unless it was to make Mark Cuban a billionaire). In my
opinion, if the management of Amazon thinks they have excess cash, they should
just pay dividends to the investors.

So do you still think Amazon buying Netflix is a good idea ?

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TomOfTTB
In a very theoretical way you are probably. right. But the real world doesn't
work that way.

The reason companies resist paying dividends is because investors take that as
a signal of maturity and maturity is the antithesis of growth in the market.

Once you start paying dividends you become the stock that people keep in their
portfolio to hedge against market instability. Like Microsoft or GE which
might grow slightly over the years but remains relatively flat.

Becoming that company makes it hard to move forward. You can't use stock
options as a draw so it's hard to get talent and your generally viewed as
static which makes it hard to get media attention. Hence the stagnation.

If you're an executive like Jeff Bezos who is actually committed to the
company becoming "mature" basically means the CEO jobs is just maintenance
from that point on and I don't think he's ready to do that yet

