For some time now, Amazon has been considered a potential buyer for Netflix. With Netflix’s stock rising more than 250% in the last year, Amazon has likely missed its chance to pick up Netflix cheaply. Amazon has made another acquisition in the same vein, however: UK-based streaming and DVD-by-mail company Lovefilm.
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Lovefilm offers Europeans a very similar service to Netflix, offering around 70,000 discs for rental by mail and about 7,500 streaming titles.
This new acquisition could allow Amazon to leverage Lovefilm’s offerings to compete with Netflix more directly stateside, and would also put the two companies head-to-head if/when Netflix rolls out a European service.
Will the Lovefilm acquisition turn out to be a good thing for Amazon?
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The next few months and years will tell. Visit the comments and let us know what you think about Amazon’s latest purchase.
(via GigaOM)
This move is definitely a precursor to Amazon’s release of a subscription rental service in America. While Amazon may have missed out on purchasing Netflix, it can still be a player in the industry if it offers a superior service. Not all titles are available through stream, and if Amazon can somehow offer a more expansive library than Netflix, it may be able to gain market share.
Nice post Shane!
The reason why Amazon does not want to purchase Netflix is that Amazon customers would have to pay tax on purchases made on Amazon.com. Since Netflix would give Amazon a presence in all 50 states, Amazon would be required to charge Amazon.com customers tax in all 50 states. As long as Amazon does not have a presence in a particular state, the residents of that state are not charged tax on Amazon.com purchases. Being required to charge tax to their customers would destroy Amazon.com’s tax free business model in most states.
As long as Netflix still has shipping centers in all 50 states, Amazon will never buy Netflix. Amazon has all but abandoned some states due to the tax issue.