Will Verizon buy Netflix?

by Leigh Goessl (Guest Contributor/Digital Journalist)

A hot rumor surfaced online yesterday that telecommunications giant Verizon is seeking to acquire the struggling Netflix.

Last week Digital Journal reported buzz was that Verizon was looking to offer some regions an option to purchase a package that streams television shows and movies over the Web.

Initially the speculation was Verizon was going to compete with Netflix; however now it seems that the company may be, in fact, trying to buy Netflix rather than battle it in this market.

The rumors of Verizon acquiring Netflix first came from subscription-based financial reporting site DealReporter. Currently this rumor is unconfirmed, reports TheNextWeb, but it “has some steam behind it.”Bloomberg reported, Porter Bibb, managing partner at Mediatech Capital, cited “unnamed people within Verizon.”

“I am hearing rumblings from inside Verizon that they are very serious about either Netflix or something similar,” according to Bibb.

Recently CEO Lowell McAdam said Verizon was thinking about making a bid for Hulu stating,

“The jury’s out, but I do believe there’s a place for over-the-top” — jargon for a digital alternative to traditional pay TV — he said. “That model has yet to be determined and I hope we’ll be a player in that.”

In addition to Hulu, there are also rumors, as reported by TechCrunch, Verizon is planning to “team up” with Coinstar’s Redbox service, to the point where the project is already purported to have a code name of Project Zoetrope and has a tentative launch date set for spring 2012.

While Verizon’s intentions are not known for sure, one thing does seem certain: online TV and movie streaming is a niche the company wants to invest in. But why Netflix and would it even make sense? Some say no, according to Deadline, primarily because it would be a costly investment being Netflix currently has a market value of $4 billion and commitments to license TV shows and movies, which come to approximately $4.5 billion.“It would be far cheaper to buy Netflix’s subscribers than it would be to buy the service,” says Janney Montgomery Scott analyst Tony Wible, who has a “sell” on Netflix shares, reported Deadline.

Over the past several months Netflix has been struggling after a change in service structure and pricing. The result of these changes was a mass exodus of customers and a dropped value in shares, which perhaps leaves the company vulnerable to takeover. After the Verizon/Netflix rumor hit the Web, reportedly Netflix saw a jump of about six percent.

Whatever direction Verizon decides to go, it appears certain the company is keeping everyone guessing and is, perhaps, gearing up for some sort of big change in the near future that will include online streaming of TV and movie content.

This article originally appeared on Digital Journal [Link]

Photo by David Silverberg