• D: All Things Digital, Tuesday, July 14, 2009 12:45 PM

The hot rumor of the day is that Amazon is interested in buying Netflix, "a seemingly dreamy match," says Kara Swisher, except that the rumors ignore two huge potential roadblocks: one being price, the other being a "nearly impossible tax problem" for Amazon.

Indeed, the online retailing giant would need to pay well above Netflix's current $2.43 market cap, which would end up being a sizable chink of Amazon's $35 billion valuation. And given that Netflix has so many distribution locations for its subscription rental business, Amazon would have to start paying state taxes-something the company avoids carefully.

Swisher thinks that Microsoft, for example, would make a more suitable suitor for Netflix. Of course, neither company would comment about such a combination, but sources tell Swisher that the partnership between Netflix and Xbox Live that allows users to watch movies and TV episodes through the popular video game console "is going like gangbusters." So much so, in fact, that Microsoft and Netflix execs have been meeting in recent weeks to see what else they can do to expand their current partnership. An acquisition, however unlikely, would certainly give Microsoft a stronger foothold in Hollywood.

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