Best Buy Trying to Buy Netflix?

The rumor of the day is that Best Buy is trying to buy Netflix for $44 per share. Henry Blodget from Silicon Alley Insider comments on the rumor:

On the "why not?" side, a Best Buy - Netflix combination would of course be vastly more powerful than a Blockbuster - Circuit City combination---because it would be two No. 1's vs. two No. 2's and because Netflix is stronger than Blockbuster in the only business that could provide real synergy: mail-order subscriptions and digital downloads.
We can understand why Best Buy would want to have content subscribers, especially those to whom it could sell new home electronics gadgets. We can also imagine Best Buy salespeople selling Netflix subcriptions to customers who buy DVD players (along with those fat-margin warranties). The combo would presumably reduce Netflix's marketing costs. And a combined Blockbuster/Netflix would also give both companies more clout when negotiating with video-box-makers: Netflix for installing its digital download service and Blockbuster on pricing.

What do you think? Should BestBuy go after Netflix or the much smaller GameFly that also rents video games?

Comments

[ILoveRichardSimmons]

I think it's so hilarious that someone might actually read that and believe it's true.

Total malarkey.

[I am me not you]

That would be a sad sad day, ruin a good company like netflix with a horrible disgusting no customer service company like Bestbuy

[Nick]

I can see why any traditional electronics retailer would desire to purchase them, but why on earth would Netflix want to sell?

[WilsonGoneWild]

I think this wouldn't be a bad idea; the article makes some good points in regards to marketing and exposure. Best Buy may not always be the "best buy", but they beat Circuit City with attractiveness and customer service. Just my 2.5 cents.

[life can be wierd]

I bet first thing that best buy would do is send customer service to a third world country. I can attest to that Netflix has pledged to not send its customer service outside country. It is in fact in Oregon Suburb.

[beanie]

Why doesn't Netflix buy GameFly? I've been wondering that for a while.

[Old Timer Too]

While it makes sense from a corporate point of view, BestBuy is notoriously short on good customer service.

One of things that keeps NF and BB competitive with each other is that both are relatively small. Moving in with corporate giants will not be good for consumers in general.

[andyg8180]

@Old Timer: Remember, netflix customer service would have nothing to do with the customer service of BBY...

Depending on your store, bby has great customer serivce, but you will get those lemons... trust me, i worked there, and theres stores i HATE going to...

Plus, the writer is correct, thats free marketing... Ohhh, you just bought a blu-ray? hey sign up for netflix RIGHT NOW and you can get blu-rays right to your house...

dont forget those "3 months free with purchase of blu-ray" something like that... it only makes sense!!

[danb]

Was it the original article or during the copy here that the last sentence supplanted Blockbuster for BestBuy? I see that it isn't so in the link.

While I can't say that I enjoy the thought of a NF/BBY merger, I can say that I wouldn't be surprised by something like that. Isn't that the sort of thing that Reed is known for? Build up a company and then sell it for huge profits. He seems dedicated to sticking with NF until its primary business is streaming videos, but he could sell off and jump ship at any point and he'd still be considered a huge success.

[ILoveRichardSimmons]

Netflix wont buy Gamefly because it's not incredibly profitable. Look at the fact that each game only really has a shelf life of a year as typically the game is redone for each year, and because platforms constantly change. Also, with the high cost per disc- as opposed to the amount of turns you would have to get out of the disc to make a profit. (Much quicker with DVDs that cost 10 bucks, not games that probably double or triple).

[Tester]

That would be the BEST thing that could happen...for Blockbuster. That would be the WORST thing that could happen for Netflix subscribers. If Best Buy would purchase Netflix I will immediately cancel my account that I have had for the last 4+ years.

Best Buy is to customer service in the same way the oil companies are to fair prices for gasoline.

[Adam]

Every single experience I've had in a Best Buy has been miserable. If this is true and it becomes reality, I will cancel once and for all.

[David Grenier]

I'm glad I'm not the only one who thinks Best Buy's customer service and general policies suck.

In general I stick with local independently owned shops for everything I can, not just out of some main street nostalgia, but because I like the salesperson to actually know what they are talking about and be honest with me, and I like the store to give a shit whether they keep me as a customer or not.

[hueristix]

A deal between them cross-promoting would make a lot of sense. This merger idea does NOT make sense, the Circuit City BB thing is idiocracy.

The synergies are not enough to warrant turning our little speed-boat into a lumbering cruise ship.

[Jason The Saj]

HOW DARE YOU COMPARE OIL COMPANIES TO BEST BUY!

Oil companies are not as sleazy and have much better customer service!

[george]

It makes a lot of sense to add a high-margin service component to Best Buy's mix. After all, they have hardware (low to no margin), Geek Squad (low margin). Plus, they get a high-reputation company to try to clean up their sullied service reputation. I'd do it a second if I was Best Buy.

But as a customer, NetFlix, I'd be begging you not to. It would certainly give me reason to re-consider moving the bulk of my business back to Blockbuster. They -are- in fact working hard to get everyone back, and an acquisition like this would give every single NetFlix user a reason to pause and check out the competition. Right now, NetFlix just does everything right, and does not give me a reason to look elsewhere.

'Henry Blodget' isn't that enough of a joke already? Mind as well propose Mcdonald/Netflix, Goodyear/Netflix, or Costco/Netflix.

Just because Blockbuster desperately want Circuit City, doesn't mean every company should merge with every other company.

George,

Is geek squad really a low margin endeavor? I've never used them but I always assumed that they billed at least 2.5x cost per man hour, even if you exclude any paltry benefits that a Geek Squad employee might get that's still a high margin for retail, and probably higher than NF gets per subscriber.

Also, I disagree that BB is still trying hard to get anyone back. With their higher pricing and propensity to overcharge/cancel high usage customers I don't see any trying at all. I think they've decided to just try to do a little better for the customers from which they make more money.

noname,

"[Might] as well propose Mcdonald/Netflix..."

Have you heard of RedBox?

I'm not saying that I believe any of these rumors, but they are within the realm of possibility. Acquisitions that make far less sense happen all the time.

"noname,

'[Might] as well propose Mcdonald/Netflix...'

Have you heard of RedBox?"

Yes, that's why I mentioned Mcdonald, because it already has a video dispensing unit. It would make a perfect partner for Netflix and give people better chances for new releases.

Costco, because it is rumored to supplies Blockbuster Exclusives titles to Netflix.

Goodyear, well... has brick and mortar locations which Netflix now lacks.

[CJ]

It's about time for Reed Hastings to cash out this startup and move on to his next big thing. This merger actually makes a whole lot more sense than the Blockbuster/Circuit City deal.

[Mike]

Noooooo! I have vowed to never shop at Best Buy again. I once tried to buy a television there and after being hassled by three different employees about buying the extended warranty I told them I decided not to buy the television after all because they convinced me it must be a terrible product if I needed the extra warranty so badly. I bought the same TV from a mom n pop shop the next day and felt much better about it.

I can see why Best Buy would want Netflix, but I still hope it doesn't happen.

[jeff]

I find it quite interesting that there are NO news reports of this "Rumor" to be found ANYWHERE in the financial news of any website. I wonder where Mr. Blodget gets his sources from

[Jeff]

I'll drop Netflix the day it happens. After getting fleeced by Best Buy on a laptop that never worked correctly I won't ever, ever shop with them again. (Personal reason, I realize, but why shop with crooks?)

[Randy]

Several points to address:

1) Bestbuy has mammothian margins on their geek squad services. Just wait till you pay them 60$ for a router, and 129 to come out. they'll fail to install it, and come back for 129 more. Then they'll set a password on your router. So, chances are, a year down the road you'll be wanting to upgrade your network with an additional computer or laptop, and blam, no password for the router. So, you go back and pay geeksquad for another router (because most likely the teenager who set that password didn't write it down and give it to you) and voila another botched install.

I can only imagine the profit margins on a slightly obfuscated heavily peddled best buy vod netflix device. I can see the 40$ warranty fee, and probably another 250$ to have some teenager come in and plug up 2 wires.