Amazon-Netflix rumors reappear |
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Amazon-Netflix rumors reappear
Rumors that Amazon.com may be looking to buy Netflix are back, causing shares of the online move rental service to spike just over two percent to $110 per share. (Earlier in the day Netflix hit an all-time high of $119 per share). However, Dow Jones and others cast doubt that a deal might actually happen in part because of the hefty value now placed on Netflix.
The company currently has a market value of $5.75 billion, and Amazon would likely have to pay a premium on top of that. That's a pretty pricey consideration, and one that would certainly be the biggest acquisition in Amazon's history. But there are other reasons why the deal might not happen. Namely, taxes.
Wedbush analyst Michael Pachter told Dow Jones that it was unlikely that Amazon would buy Netflix, since it would give the Seattle online retailer a physical presence in many states which then would force it to collect sales tax.
That was also the view of analyst Brian Fitzgerald of UBS who wrote in a research note posted on The Wall Street Journal's MarketBeat blog:
We believe the largest obstacle to an AMZN/NFLX deal could be the issue around state taxation for all items sold on AMZN. In general, the basic reason why eCommerce companies are not required to charge state sales taxes online is because most eCommerce operators do not have a physical point of presence in most states.
Amazon has been attempting to drive more sales of digital goods on its site, including electronic books for its Kindle device. And for that, Netflix's growing streaming video service could be enticing. However, the brick-and-mortar component of Netflix still could be too big of a hurdle.
It was only five months ago that we last heard rumors of a possible Netflix-Amazon tie up. But at that time, the tax issue also surfaced as a potential roadblock.
Related: "Amazon's sales tax battle with states headed for a rematch"
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