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There are rumors afloat that Amazon may be purchasing Netflix. One source has the purchase price at around $1.5 billion while another pins it at $2.1 billion. As a result, Netflix shares are up 5 percent today. The online video rental/download/purchase market is still in its infancy even if crowded with the likes of Apple, Blockbuster, Netflix, Amazon, and even Wal-Mart. And those are just the big boys playing in that space.
Amazon would do well to acquire Netflix if it really wants to be a formidable presence in online digital media. The problem: Netflix maintains 43 distribution centers spread across 30 states while Amazon has only 8 distribution centers (reduced from 20). Apparently, e-commerce sites don’t have to charge sales tax on most items if they don’t have a physical presence in a given state. Right now, Amazon only charges state sales tax in Washington, North Dakota, Kentucky and Kansas.
So Amazon has to decide if buying Netflix is worth not only the purchase price but also inconveniencing customers in 30 states who probably count “no sales tax” as one of the reasons they use Amazon in the first place…