This whole Netflix-Qwikster split had a fair number of people wondering if Reed Hastings had lost his mind. Hastings is no dummy, though, so there’s got to be some sort of method to the perceived madness.
Industry analyst Michael Pachter wrote in a note to clients the very same thing; that there’s “a method to their madness,” reports MarketWatch.
Pachter’s theory? Netflix could sell its streaming business to Amazon, a company with deep pockets that’s been aggressively trying to make inroads with its digital content offerings. It’s done well with digital books, it’s still trying to get its footing with digital music, and perhaps now we get to see how big it can go with movies and TV. And what better way to go big with streaming movies and TV than to buy the company best known for streaming?
But why split the company in two and just sell the streaming features to Amazon? Turns out it might have something to do with taxes. Since Netflix has physical distribution centers in various parts of the country, Amazon would ostensibly have to start collecting sales tax in those same areas—but just selling streaming bits of entertainment wouldn’t be taxable.
Another potential plus to Amazon’s deep pockets: It might have an easier time securing deals with content companies. Netflix’s leverage so far is that it has customers who want to watch content. Amazon has the same, but it also has customers who want to buy physical DVDs, music, and just about anything else a content company might produce—tangible or otherwise.
I actually love this idea from a consumer perspective for two reasons: One, there’s a chance that Amazon might bundle access to all this new content with its $79-per-year Amazon Prime expedited shipping offering. Amazon already doles out free streaming for certain titles but most of it’s older and/or more obscure stuff—nothing like you’d find on Netflix.
Second, imagine this: You want to watch a current season of a TV show or a newer movie but it’s not available for unlimited streaming. In Netflix’s current state, it’s either just not available or maybe it’s available via the DVD-by-mail service (that’s more complicated, too, now that you have to use two different sites and accounts).
With Amazon integration, anything that wasn’t available for instant streaming as part of your unlimited monthly package could be offered to you either as a paid stream through Amazon’s Video on Demand service or as a physical DVD purchase through Amazon’s online store. That’d be convenient for consumers and could be pretty lucrative for Amazon, too.