History: Did Amazon try to buy Netflix for $12M in 1999?

Just imagine what could have been?

A new book to be released this week by Reuters reporter Gina Keating suggests that Amazon.com tried to buy DVD movie rental service Netflix for $12 million back in 1999.

Whoa. That certainly could have been a lot cheaper than Netflix’s current market value of $3.7 billion.

Amazon.com was just five years old at the time, and it had yet to move heavily into online video. But, according to Keating, the author of “Netflixed,” Amazon.com founder Jeff Bezos made a move on Netflix, one which was reportedly rebuffed because of its low price tag.

Interestingly, a spokesperson for Netflix denies that an offer of the sort described in Keating’s book ever happened, Cnet reports.

Netflix and Amazon have been the subject of M&A speculation for years, including last year after Netflix’s stock was hammered after a series of missteps..

Now, one might think that a deal is far off, especially since Netflix CEO Reed Hastings last month dubbed Amazon.com Prime “kind of a confusing mess.” Amazon also recently signed with one of Netflix’s longtime video distribution partners, Epix.

One gets the sense that Netflix — whose CEO Hastings sits on the board of Microsoft — and Amazon.com don’t like one another much.

  • ForEditor

    FIVE LESSONS I LEARNED FROM THE PROPOSED AMAZON-NETFLIX DEAL

    This week we were all buzzing, Twittering, Appnetting, and of course Foursquaring about the big news that Amazon offered to buy Netflix for $12 million. Of course, Netflix said no and today the company is on a course to be worth nearly triple that by year’s end. What can you take away from this to help yourself?

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    1. DON’T SELL FOR LESS. Reed Hastings knew that his company had an intrinsic value of well over $12 million. You too can learn your intrinsic value with freely-available tools. A good rule of thumb is to value a fast-growing company at about 48 times its previous year’s earnings. If you have no earnings, just make up a number and stick to it.

    [picture of two men in suits shaking hands]

    2. DON’T SELL TO A BIG COMPANY WITHOUT A GUARANTEE. We have no knowledge of this particular deal, but we’re going to assume that this deal would have been an “acquihire”: all the men and women at Netflix would have been absorbed into Amazon and dispersed throughout the company. Read up on the company that might be buying you. If you wouldn’t work for them of your own volition, don’t work for them as the result of an acquisition. Get a guarantee that your company will continue to operate as a self-contained unit (SCU) within the larger company. According to a 2010 survey, SCU employees are 75% more likely to remain in your employ than are acquihired employees not in an SCU.

    [picture of woman putting on eyeglasses]

    3. REMEMBER YOUR VISION. You’re not here just to sell widgets. As a startup, your goal is to change the world. Would selling to a large company for a small sum further that cause? In some cases, yes: eBay famously bought 25% of Craigslist, and Craigslist used that money to expand to hundreds of geographies worldwide. In other cases, no: Google bought Doubleclick and rapidly wound down the latter’s innovative targeted marketing systems. You can do a “vision-check” by setting up a one-on-one with a couple of senior executives at the company who’s offering to buy you. If they have $12 million to spend on you, surely they could buy you a cup of coffee one day.

    [picture of stylized model of an atom]

    4. CHECK IN YOUR NETWORK. Even in 1999, many techies were on “social networking” web sites like Myspace, LinkedIn, ZDNet, and of course Meebo. The most provocative juice about a company comes from the men and women who work there. Ask your friends about your potential owner. Do they know or have they heard anything that would cloud your understanding of their culture?

    [picture of anguished-looking man sitting in front of laptop with hands on his head]

    5. KEEP A COOL HEAD. When I first saw an eight-figure acquisition offer pass onto my smartphone, I yelped so loudly I set off the fire alarm! Obviously such cacophony would get one thrown out of an executive suite, if not arrested or killed. When the offer comes in, delay microblogging about it for at least 45 minutes. I recommend that a potential acquisition target have some chamomile tea, watch last night’s “Conan,” do some abdominal exercises, and then reread the email. It’s amazing what clearing your head would do for your bottom line.

    Thank you for listening and best of luck to everyone out there!