Is Amazon buying Netflix?

Image of Amazon tablet Press Conference announcement September 28th

People were baffled when Netflix created a separate service for customers who wanted to watch “streaming” movies online. (This week Netflix shifted its core business — where DVDs are mailed to your home in a red Netflix envelope — into a separate subsidiary.) But at least one analyst thinks it’s a smart move that could pay off for the company’s investors — because it makes it easier for Netflix to merge with Amazon!

“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…” argues Michael Pachter at Wedbush Securities. Originally he’d assigned an “underperform” rating to shares of Netflix, but this week he’s switched that to an “outperform” rating. “Netflix’s financial flexibility is quite limited, while Amazon’s is virtually unlimited,” Pachter argues. With billions of dollars in new money, the Amazon/Netflix hybrid could acquire the rights to stream even more movies and video content online.

But of course, that’s just the beginning. Amazon really wants to stream movies to your Kindle — or at least, to a next-generation Kindle with a color screen that’s been optimized for video. Any day now, Amazon’s expected to announce a fancy iPad-style “tablet” computer, a touchscreen device which displays ebooks (like the original Kindle), but which can also handle movies. A blogger at TechCrunch claims to have seen a prototype, which offers a slick “carousel” interface where you rotate a circle of (color) thumbnail images that represent your movies, apps, mp3s , or books.

It’s a brilliant marketing move, because they’d all be purchased through And Amazon already has a vast library of “content” available for purchase, including ebooks, music downloads, and online movies. They’d basically create a slick new device for delivering all that content to their customers — and all that content would also help them to first sell the device! (Apple’s iPod was successful because of all the songs available in the iTune store, while the iPad’s received complaints because there aren’t enough ebooks in its iBookstore.)

I think the Kindle convinced Amazon that a great device can create a big wave of new loyal customers, plus a lot of new sales. Amazon has billions of dollars to spend, plus a payroll filled with clever engineers, so they’ve got everything they need to create the next big and exciting gadget. Not everyone’s convinced that they’ll stock their content libraries with Netflix’s streaming movies. (In the comments at ZDNet, someone suggested NetFlix might form a super-company instead with, teaming up to offer an even bigger library of online video!)

But there’s one last piece of information that suggests that Amazon’s planning something big, and that it’s going to happen this Wednesday. “Press invites just went out for an Amazon press conference next Wednesday in New York,” reported a blog about technology at MSNBC.

It could be an announcement that Amazon has acquired Netflix, but the blogger speculates that “doesn’t go to New York for anything but the biggest of product launches anyhow. So we’re going to assume that the long-awaited tablet is finally here.

“And if the rumors are true, boy, will it be an earthshaker.”