Why did Netflix by DVD.com after they made the point that streaming is clearly the future?
Was this a smart move?
The dvd segment is still a solid market that contributes significantly to the industry revenue, even though streaming is the future. Buying dvd.com increases the top line, customer base and eliminates competition in that segment.
Increase in customer base: Buying dvd.com enables Netflix to redirect all dvd.com subscribers to Netflix, and add them to their streaming and dvd membership.
Also with dvd.com not growing by leaps and bounds, the valuation and acquisition price paid must be excellent, when compared to the value added through merger synergies like operating assets.
On a consumer note: Have you noticed how not all movies are available via streaming. This copyright limitation (largely distribution rights/streaming-cost related) makes the dvd segment a critical component in the consumer experience and the industry.
Organic growth is irreplaceable, but acquisition is the fastest way to grow!