Amazon once offered to buy Netflix for $12 million, book says

In late 1990s, Netflix was still a struggling start-up when CEO Reed Hastings flatly rejected Amazon's acquisition offer, according to an upcoming book.

Jeff Bezos might have saved his company some money -- and a lot of trouble -- had he not tried to lowball Netflix back in 1999.

Netflix CEO tried to negotiate to keep Amazon out of the DVD mail-order rental business, according to an upcoming book. James Martin/CNET

According to "Netflixed," a history of the DVD-and-streaming pioneer that's due to go on sale Thursday, founders Reed Hastings and Marc Randolph met with the Amazon CEO in 1999, after he indicated he might want to partner with Netflix in some way.

"Hastings also wanted to discuss selling Netflix to Amazon if the price was right," writes Gina Keating , the former Reuters reporter who authored the book. The only problem was that Hastings was "less than impressed with Amazon's $12 million offer."

Last week, a Netflix representative said the company would not comment about the book, but Jonathan Friedland, chief communications officer for the company, called this afternoon to deny that Amazon made such an offer. Keating told CNET that she stands by her story and said she received the information from Randolph and others who were at the meeting.

We do know that Variety and others reported Hastings offered to sell to Blockbuster for $50 million. Blockbuster declined.

At the time, not even Hastings was sure Netflix would find a successful business model, Keatings wrote. Talk about a missed opportunity.

Blockbuster would file for bankruptcy protection in 2010 and billionaire Charlie Ergen's Dish Network acquired Blockbuster's assets out of bankruptcy last year. On Friday, Dish gave up on a plan to try to turn Blockbuster into a Netflix rival once more.

During the period when Blockbuster's business was sinking, Netflix began an extended winning streak in which the company pioneered streaming Internet video, increased subscribers by at least 1 million in each of seven consecutive quarters and saw its market cap reach $16 billion. That was before Hastings tanked the stock last year by alienating customers with the clumsy handling of a price increase and an aborted attempt to split off its DVD operations.

For anyone thinking about buying "Netflixed," note that it isn't just a history lesson. The book offers clues to what may be going on today.

For example, Hastings has for much of the past two years politely dismissed the theory that Amazon Prime's video service was a serious challenger to Netflix's streaming business. But in her book, Keating suggests that Netflix has long been wary of Amazon.

Keating wrote that after Ted Sarandos, Netflix's content-acquisition chief, learned in 2004 that Amazon was preparing to launch a mail-order video rental service to compete with Netflix, Hastings responded by negotiating with Bezos to try to keep Amazon out of the business.

Keating also said in her book that Netflix's leadership feared Amazon at the time more than Blockbuster, though the video chain was a much larger player in home entertainment. According to "Netflixed" Amazon had the kind of e-commerce and technology chops that Netflix respected.

Fast forward to two weeks ago. Hastings stopped being polite when asked about Amazon v. Netflix. During an interview with The Wall Street Journal, the CEO called Prime video " a confusing mess ."

Update, 12:31 p.m. PT: Adds a statement from a Netflix representative denying Amazon offered to buy Netflix.

2nd Update 10:17 a.m. PT To include statement from book author who stands by her account of Amazon's offer to purchase Netflix.

 

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