updated 08:55 am EST, Wed December 23, 2009
Amazon may hedge against Apple tablet
Rumors that Amazon might buy Netflix sparked brief but sharp spikes in shares of both companies yesterday. While the sources of the rumor aren't known, talk of an acquisition was allegedly sparked by Apple's supposed iTunes TV subscription plans and their potential impact on both companies. Amazon in particular would seek to bolster its Video On Demand service by acquiring one of its largest competitors, which thrives primarily on subscription-based movie and TV season rentals.
For Netflix, the rumored deal would give it the advantage of a prime web portal. Neither Amazon nor Netflix has commented on the authenticity of the rumor.
Besides supplementing Amazon VOD, which is currently limited to per-title purchases and rentals, an acquisition would serve as a hedge for Amazon against an Apple tablet should it decide to supplement or replace the Kindle with a color model capable of video. The company has publicly said that a color e-book reader was years off but has also assumed it would use e-paper, which as of now often doesn't produce adequate color and is too slow to handle video. The rumored Apple device would not only be a video hub but also an e-book alternative thanks to a 10-inch touchscreen.