Tuesday, December 13, 2011

Should Verizon Buy Netflix?

Build it or buy it may be the discussion inside Verizon these days on what to do about a movie rental business. It seems owning the wireless spectrum isn't enough, it is important to also have services to sell on that pipeline and the movie business can be lucrative.

As video consumption shifts more and more from DVD to online, so too changes the consumer preference to either own or rent. Studios pushing the sale strategy are pushing consumers with cloud ownership of digital copies with every DVD sold. And of course Apple and Amazon are there as well with their cloud strategies.

The movie rental business has been shaken up in recent months with the various missteps made by Netflix. And Blockbuster is trying to refocus their business with the help of their new owners Dish/Echostar. So now Verizon is considering making a play for Netflix and perhaps to help them re-establish their formal glory. "Chief Executive Officer Lowell McAdam told an investor conference on Dec. 7 that the company aims to move beyond its Fios TV service into the streaming-video business." And while the speculation is that Netflix is on the Verizon radar, why isn't Hulu also being considered. Hulu has indicated an interest in being sold while Netflix has not. Both require bandwidth that Verizon can support and Hulu offers a duel revenue stream of subscription and advertising. Plus Hulu doesn't have the burden of mailing DVDs and could support a theatrical film streaming service expansion.

Yes, I like the idea of Verizon pursuing a streaming distribution strategy. I just wonder if all the baggage hanging over Netflix will not allow them to recover and prosper again. My vote is for Verizon to consider a Hulu acquisition but should it be Netflix, the first order of business would be to roll back the pricing model, market to all former customers with an additional special incentive, and consider rebranding. How does NetFios sound?

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