Verizon May Simply Purchase Netflix Rather Than Compete
Instead of competing with a possible rival, why not just buy them outright?
Last week brought reports that Verizon Communications is looking to launch a non-FiOS video streaming service to compete with Netflix and cable TV providers. But now Fox Business claims that Verizon doesn't plan to compete with Netflix at all -- it's interested in purchasing the video streaming company instead.
According to the report, Verizon is evaluating whether a purchase of Netflix could buy it easy entry into the video delivery business rather than attempt the feat on its own. Little else is known about Verizon's potential buyout at this point, and a Verizon spokesperson declined to comment on the report. Netflix said it doesn't comment on rumor and speculation.
Last week Reuters said that Verizon's video streaming service will be introduced outside of markets where it currently offers its FiOS broadband and TV package. Even more, it may actually be rolled out to around 85 million U.S. households in 2012. Little else is known about the Verizon service, and there are mixed opinions by those close to the situation about what Verizon will actually bring to the video streaming table that's not already covered by other services.
Unnamed sources claim that Verizon may be eying a video streaming service to grow its overall customer base which will essentially lower its programming costs on a per-subscriber basis. The more subscribers a distributor has under its belt, the easier it is to negotiate lower fees.
Previously Netflix CEO Reed Hastings said that anyone wanting to go up against his company or the likes of HBO will need to "commit to multiple-year spending between one and two billion. At this point, none of these guys have chosen to do that."
After the Fox Business report on Monday, shares of Netflix soared more than 6-percent. That's good news considering its stock price took a nosedive down to a new 52-week low just two weeks ago. The drop was the result of the company reporting that it would fall to a loss in 2012 if it was unable to boost its user base.
Netflix subscriptions dramatically fell months ago after Netflix decided to split its DVD and streaming services, essentially jacking up the overall price to nearly 60-percent when compared to the previous plan. Netflix reverted back to its former state, but its user base has been bruised ever since. A buyout by Verizon Communications may be what the company needs at this point.