Amazon Considering Buying Netflix

As Netflix continues to build a movie-rental empire, sources say that Amazon could be poised for a takeover bid.

Although Netflix acquisition rumors are nothing new, Wall Street Journal analyst Michael Corkery makes a good case for why the acquisition makes sense. As a company that has emphasized the move away from physical media and towards digital distribution, Amazon’s interest in a movie rental company like Netflix might be seen as odd. However, according to Netflix, half of their customers streamed at least 15 minutes of video during the fourth quarter of 2009. Netflix expects this number to grow to two-thirds of customers by the middle of next year.

In addition, a Netflix merger would be consistent with Amazon’s previous strategy.

Sandeep Aggarwal, an analyst at a London investment firm, says that a Netflix acquistion would be very similar to Amazon’s acquisition of Zappos last year. He says that given Netflix’s amazing Q4 numbers, “There is now even a higher possibility (of a deal).’’ He added that, “If someone is a category leader and it is still growing rapidly, they go ahead and acquire it.’’

Given the fact that Apple’s iPad has taken the fight to Amazon in the last week, Amazon could easily be tempted by the possibility of an acquisition. Acquiring Netflix would allow Amazon to seriously injure Apple’s fledgling movie rental service. That may be an opportunity that Jeff Bezos is unwilling to pass up.