Let me preface this by saying that the following is all speculative since Amazon does not comment on rumors.  Here’s the story: Last summer the market hosted the idea that Amazon could potentially acquire Netflix.  This idea was quickly shot down by analysts because at the time it did not make sense for Amazon, a company who is quickly phasing out the sale of physical items like books and CDs in favor of streaming and downloadable content, to purchase Netflix, a company that relies heavily on the distribution of physical DVDs.  But that was then and this is now.  Netflix’s latest quarterly earnings shared the following infomation: the total number of Netflix subscribers grew by one million in Q4, reaching a new milestone of 12 million subscribers total; 48% of its customers streamed at least 15 minutes of Internet video, that’s up from 28% last year; and they expect at least 66% of its subscribers will watch movies over streaming video by mid-2011.  In sum, Netflix has certainly become a more attrative buy for Amazon for two reasons: (1) Netflix has a huge customer base; (2) their subscribers are watching way more video with the Instant Watch streaming service, rather than opting for DVD rentals.  Amazon has a $54 billion market value and could easily eat up $3.4 billion Netflix.  If Amazon has plans of such an aquisition they better act soon; Netflix is getting more expensive every day.  Its stock hit an all-time high this week, up 22% to $62.33.  This could certainly shake up things in the industry, making Amazon an even stronger force in the growing digital market.

[Via The Wall Street Journal; Engadget]