Verizon is reportedly thinking about purchasing Netflix in an effort to make its way into the video streaming/DVD rental business and to give Netflix a boost as well.
Just last week, reports indicated that Verizon was preparing to launch a video streaming service that would rival the likes of Netflix and traditional cable TV. However, according to Fox Business, Verizon is reportedly thinking about purchasing Netflix in an effort to make its way into the video streaming/DVD rental business and to give Netflix a boost as well.
While Verizon has a large user base with its internet, phone, data and wireless services, it would have had to come up with a unique video streaming service that challenged already-established Netflix as far as content and subscription prices. This wouldn’t be an easy task, and taking hold of Netflix would give it an automatic 23 million customers.
The deal could be advantageous for Netflix as well, since it has been struggling this year after raising prices and changing plans back in July. From there, the once unstoppable video giant continued ticking off customers with antics such as the loss of Starz content after the premium subscription channel refused to renew its distribution deal, launching a DVD spinoff business called Qwikster requiring a completely separate account, and then changing its mind about the Qwikster idea altogether.
So far this year, Netflix stock has fallen 57 percent. Just last month, it announced a bleak 2012 outlook and its shares dropped to their lowest point since March 2010.
Despite the potential advantages that most reports are pointing out, the potential disadvantages could likely outweigh any benefits listed above. For instance, Verizon could get greedy and decide to limit the Netflix service to Verizon customers only. Also, Netflix has been known for its rebellion against traditional cable TV by offering its own business model with cheaper monthly services and a growing amount of content. If Netflix were to fall under Verizon's thumb, this likely wouldn't be the case anymore.
According to Porter Bibb, managing partner at Mediatech Capital, Verizon may partake in a "bidding war" for Netflix that could end in a $4.6 billion purchase by Easter 2012. However, neither Verizon nor Netflix have confirmed the rumor.
Netflix shares jumped 6.2 percent to $75.26 after the announcement Monday.