Would Verizon really buy Netflix? And how would it work?

nflogoVerizon seems intent on building an over-the-top video business – interesting timing since it also just signaled that it’s had just about enough of building out its uber-expensive FiOS network, content to let it pass just the most concentrated – and likely most profitable – areas in its serving territories. The latest Verizon OTT rumor: it may be lining up to acquire Netflix in what would be quite a game-changing move.

Verizon is certainly up to something. In early December, Reuters reported it was working on a secret plan to develop an over-the-top video service it could offer outside its own serving areas (CP: Verizon reportedly considering OTT offering). Around the same time, Verizon Wireless acquired wireless spectrum – to the tune of some $3.6 billion – from cable operators including Comcast and Time Warner, and also said it would resell cable TV service from those MSOs in some locations (CP: Verizon’s McAdam says video key to LTE and smartphone adoption). And hot on the heels of that news were more rumors that Verizon was planning a partnership with RedBox, whose focus is on physical DVD sales from its now ubiquitous boxes.

Now this week, Bloomberg is reporting that Verizon is in serious negotiations to acquire beleaguered, but still market-leading video streamer Netflix for $4.6 billion. Says Bloomberg:

Verizon Communications Inc. (VZ), the second-largest U.S. phone company, is very serious about a bid to acquire online movie provider Netflix Inc. (NFLX), an investment banker said.

Verizon may kick off a bidding war for streaming-video pioneer Netflix that could result in a sale by Easter for about $4.6 billion, said Porter Bibb, managing partner at Mediatech Capital, in a television interview yesterday on Bloomberg West, citing unnamed people within Verizon.

That’s a LOT of smoke, so we’d certainly expect to see some fire soon.

It’s notable that this wave of news and rumors started out with word from Verizon that it was planning to limit its fiber-based FiOS build-outs and refocus its network deployments on LTE (which, by the way, will likely drive more video as well, to smartphones and tablets if not to the living room flat screen). The company is clearly starting to see itself not just as a network-builder but a content, apps and services provider – which means it cares less what underlying network infrastructure is delivering its programming.

These rumored moves are not Verizon’s first moves into OTT delivery. Its FlexView service already delivers FiOS content to PCs and devices (CP: Verizon FiOS Flex View app now for Apple iPhones, iPads, iTouch 4) and the company also recently started delivering FiOS programming to Microsoft Xbox platforms (CP: Verizon part of Microsoft’s Xbox video programming team).

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