Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 9
This topic comes up all the time, but I don't know why so many people are obsessed with Netflix bailing out BBI. Just the antitrust questions alone kill this deal and if they don't, it certainly doesn't make for a clean merger. Look at the a la carte concessions SIRI and XM and proposing and you can see the types of hoops you need to jump through. With MOVI and local stores going bankrupt, there is no way that this would be allowed.

If we're going to speculate on mergers, lets talk about companies where more synergies exist. I don't buy into Amazon buying us because of the complications with the taxes, but Microsoft could certainly offer $25 a share, add video games, raise prices by $2 and watch while BBI followed. Better yet, TWX takes a chunk, raises the price $5 and ensures that they can keep BBI selling their films and control the commoditization of the their industry. HBO already has 30 million subs, what types of synergies could be realized if you could get any NFLX movie on demand? (ignoring the technical problems for the moment) I think we could list a dozen companies that could add value, without monopolizing the industry.

It's hard to argue the the FTC wouldn't object to BBI because the reason why people want it, is to end the price war. Nevermind the fact that the companies are rivals, the debt, etc. We can argue til we're blue in the face about whether or not a BBI merger would make sense, but until I see some kind of official proposal, I'd rather focus on dreaming up scenarios without the FTC's scrutiny.

Personally, I don't know that I'd be a fan of selling out. The large cap stocks offer diversification of revenue, but not the same risk/reward as a midcap. I'm still interested in thinking through the what if's, but have always been skeptical of the rumors.

The market has sold off Netflix to a point where the price cuts are baked into 08 earnings, but in an acquisition, the earnings are pretty easy to fix. It's a question of whether an acquiring shareholder would want to sacrifice growth for value? As a growth guy, I'd rather wait BBI out, but the frustration over the price cuts may have made them vulnerable to a low ball offer. While a DVD monopoly would certainly ensure higher margins, why go through the trouble, when there are plenty of deep pockets that would be much more appropriate?
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.