In one corner, we have Netflix, pretty much the undisputed champion of online video streaming. In the other, we have Carl Icahn, probably the only corporate raider who really survived the ’80s. Think Gordon Gekko, only less of a criminal. And he’s gunning to take over Netflix.
And if that’s not terrifying enough, when it comes to home video, Icahn literally has no idea what he’s doing. Which is why Netflix is preparing a “poison pill,” which is a fancy way of saying anybody who wants to try a takeover will have to negotiate with Netflix’s board, instead of going from shareholder to shareholder.
Here’s why Icahn’s inevitable attempt to take over Netflix will be very, very bad for you, the Netflix user, if it succeeds.
First, and most basic, Icahn doesn’t understand the home video market. This was pretty dramatically demonstrated by Blockbuster. Icahn was the guy who forced out the CEO who was at least converting the company into something more in line with the realities of the market. And then when Blockbuster inevitably tanked, Icahn blamed the guy he forced out, instead of his own lack of patience.
Secondly, Icahn’s a corporate raider. Whether that’s good or bad is really more a matter of opinion than anything else, but the guy’s modus operandi is and always has been find a company with something of value, pump up the value of it as much as possible, and then sell the valuable part to someone else. The problem is that the valuable part, namely Netflix’s streaming business, is mostly worth money because there are people, like, say, Comcast and Hollywood, who would very much like to kill it. If Icahn’s bid goes wrong, it could literally send home video back to the twentieth century.
Thirdly, one way or the other, your Netflix would start sucking. Icahn is one of those guys who likes to see a rapid return on his investment: In a business like video streaming, that almost inevitably means slower turnaround, lower quality streams, and more server problems.
It’s unlikely Icahn’s bid will succeed. First of all, Netflix has seen him coming and secondly, frankly, nobody wants the guy who many think killed Blockbuster running their home video business. That said, Icahn doesn’t go quietly. Expect this fight to get ugly.