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Analyst: Netflix Positioning to Sell Streaming Biz to Amazon

22 Sep, 2011 By: Erik Gruenwedel

Wedbush analyst Michael Pachter goes out on a limb saying Netflix’s separation of disc and streaming businesses paves the way for acquisition by the ecommerce giant

Netflix’s controversial decision to split its disc and streaming businesses into separate entities could actually be laying the groundwork for a sale of the streaming unit to Amazon, an analyst said.

Michael Pachter with Wedbush Securities in Los Angeles said Netflix’s separation from its pioneering by-mail disc rental service was an attempt to make the streaming unit with 20,000 titles more appealing to Amazon. The ecommerce giant quietly has launched its own streaming service with 9,000 titles as part of the Amazon Prime membership loyalty program.

In a Sept. 22 note, Pachter said there is “a method to their madness,” referring to Netflix’s Sept. 1 poorly communicated rate hike and hastily created Qwikster disc rental service.

The analyst said acquiring Netflix would allow Amazon to pursue a global streaming service without ongoing sales taxes issues on consumer purchases dogging it in many states, among other advantages.

“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,” Pachter said. “Netflix’s 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.”

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