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You are here: Home / World Wide Web / Will Verizon Invest Billions in Netflix?
Verizon Could Invest Billions in Netflix in Streaming Video Play
Verizon Could Invest Billions in Netflix in Streaming Video Play
By Jennifer LeClaire / CRM Daily Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
The rumor mill is churning about a Netflix acquisition. The notion that Verizon Communications could buy Netflix is doing some good for the streaming-video company's battered stock, which had lost more than two-thirds of its value this year.

Last week, Verizon CEO Lowell McAdam started talking about an entry into the streaming-video market. Verizon operates Fios TV service but he indicated a new initiative.

Now, Bloomberg is reporting Porter Bibb, managing partner at Mediatech Capital, saying that Netflix could sell itself for about $4.6 billion by Easter. Bibb told Bloomberg West, "I am hearing rumblings from inside Verizon that they are very serious about either Netflix or something similar."

Netflix's Fund Raising

Netflix could not immediately be reached for comment. But the company has been through some rough times this year with customer service faux pas that angered its membership and caused it to lose millions of customers. That led to a call for a new CEO. But could Netflix actually sell itself? The company survived the start-up days and doesn't seem to be in crisis despite its public chagrin over how it handled the September price increases that drew the ire of its membership.

Last month, Netflix raised $400 million, $200 million through registered stock and $200 million through private placement of convertible notes. With the new capital infusion from two long-term oriented investors, Netflix CFO David Wells said the company had "strengthened its balance sheet and remains focused on growing its streaming subscriptions and returning to global profitability" after its United Kingdom launch next year.

But Brad Shimmin, an analyst at Current Analysis, said he would not be surprised to see Verizon make a move on Netflix. As he sees it, this is the type of acquisition strategy that service providers are pursuing.

"Service providers have a desire to be the sole provider of all the entertainment and productivity services their customers consume so they can offer the best service level and best cost option and, in turn, reap the best profits," Shimmin said. "I've been on a seven-year waiting list for Fios, not from demand but from infrastructure. It's very expensive to roll out that type of infrastructure."

The Last Mile

By acquiring Netflix, Verizon would acquire everything it needed to hit the ground running toward filling in the so-called last mile. Shimmin said the money is made in the last mile, a term used to describe the final leg of delivery connectivity from a communications service provider to the customer.

"Whatever you are doing that is bringing entertainment into the hands of the user opens the door to profits," Shimmin said. "Since Netflix's business model has somewhat moved from delivery, which is obviously the most expensive model, to streaming, they have nothing but upside. The biggest threat they face is with Amazon."

For all the talk, though, it may not be Netflix that Verizon is courting. Reuters reported last week that Verizon was looking to move into the streaming video business via a deal with Redbox. And Netflix appears to have its sights set on major international expansion without help from a communications giant.

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