Why Doesn't Amazon Just Buy Netflix Already?

| About: Amazon.com, Inc. (AMZN)

It should be the most obvious engagement since Brangelina, but everyone seems to be discounting the possibility that Amazon (NASDAQ:AMZN) could buy Netflix (NASDAQ:NFLX). I'm having a tough time figuring out why they wouldn't want to, given how cheap Netflix has gotten after the latest selloff.

First off, it wouldn't be prohibitively expensive for them, as Netflix actually isn't that large of a company, with a market cap smaller than LinkedIn (NYSE:LNKD), Zynga (NASDAQ:ZNGA), or Groupon (NASDAQ:GRPN). Even at a premium, Amazon could snap them up for about half the cash they have on the balance sheet, and could easily cover the looming content costs that have plagued Netflix lately with their free cash flow. Or, if they were smart, they would just use their own inflated stock price to do the deal and save some cash to continue expanding the online content library.

Second, it's not like Amazon doesn't want to be in the streaming business. In fact, they've already spent hundreds of millions of dollars building their own, and were even rumored to be in the HULU sweepstakes. It's not often that you can acquire the main competitor in a market you'd like to enter, and by acquiring Netflix they immediately become a dominant player in what promises to be a lucrative market.

In addition to benefiting from integrating Netflix' existing business model, Amazon could also get a bonus by converting some of Netflix' 20 million plus users into Amazon Prime customers if they offered some of the new Netflix content on Prime Instant Video. How can they pass up this win-win opportunity to instantly increase revenue and add new shoppers at the same time?

This deal accomplishes so much in one fell swoop that I just can't imagine it won't come to fruition. Netflix solves their funding shortfall and gets access to the necessary resources to build on their existing customer base, and Amazon continues to develop their burgeoning platform as an online one stop shop for all your entertainment needs.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.