Big rumor: Verizon may buy Netflix

By Andrew Couts December 12, 2011

Verizon is said to be in talks to buy video streaming giant Netflix, according to, well, we don’t know exactly. But the rumor, which was first published by DealReporter (subscription-only), is exciting investors on Wall Street so much that Netflix’s stock price jumped as much as 6.8 percent today thanks to the speculation. That said, there may be some truth to the gossip.

Twice last week, we heard rumors that Verizon is making moves into the video streaming market. First, we heard from Reuters that it was potentially partnering with streaming service Epix, and would scoop up their library of content. The next day, we heard that, actually, Verizon would be partnering with kiosk DVD rental company RedBox, a partnership known internally as “Project Zoetrope,” according to a report from TechCrunch. Project Zoetrope would offer video streaming and downloading to a number of devices, including iOS- and Android-based devices, Xbox 360, Roku Box, Google TV-enabled televisions, and Web browsers.

Perhaps not coincidentally, Netflix offers its services through exactly all of those devices, among others. Until now, however, Verizon’s service would reportedly compete with Netflix — not be Netflix.

Now, there is so far absolutely no evidence that Verizon is actually considering buying Netflix, or even that Netflix is up for sale. The main thing fueling this speculation is that Netflix, while troubled in recent months, remains a popular and valuable brand. But because of its recent missteps — a disastrous price hike and the failed split of it DVD and streaming business — its stock price has fallen precipitously, from an all-time high of nearly $300 a share, to around $75 a share. (As of this writing, it’s up 5.4 percent, to $76.29.) That means buying Netflix right now would be an extremely good deal, assuming the company stops screwing up, and starts earning back customers.

In other words, Verizon may not actually be in talks to buy Netflix. Instead, people might just think that it’s a good idea for Verizon to buy Netflix, since it could presumably get it on the cheap (if you consider $3.9 billion “cheap”). That is to say, someone told someone that Verizon and Netflix are in acquisition talks, even though they aren’t.

For now, we’re putting this firmly in the “things to watch” category. If Verizon does want to buy Netflix, it’s going to do everything it can to stomp out these kinds of rumors, since they only serve to make Netflix more valuable — thus, more expensive — on The Street. So even if Verizon says it isn’t planning to buy Netflix — something it hasn’t yet done, to the best of our knowledge — that doesn’t necessarily mean that it won’t. And just because people are saying that Verizon is in talks to buy Netflix doesn’t mean it is.

Got all that? Yeah, neither do we. But we’ll let you know as soon as the smoke and mirrors are gone.

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