Yesterday, shares of Netflix got their semiregular rocket boost–with its stock up more than five percent to close at just over $42–from rumors that Amazon was interested in buying Netflix.

Oh, it’s a seemingly dreamy match–the top online retailer snapping up the upstart U.S. mail-order DVD movie and television show service.

But the speculation completely ignored the giant price needed to buy the Silicon Valley-based Netflix (NFLX)–well above its current $2.43 billion market cap, to be sure–which would be a big chunk of Amazon’s $35 billion valuation.

And it also leaves out the nearly impossible tax problem Amazon (AMZN) would acquire if it ever bought Netflix, given that Netflix has many U.S. distribution locations for its subscription rental business. Amazon does not like paying state taxes and avoids them carefully.

Instead, those interested in seeing the independent company in the embrace of a larger one might want to consider a more suitable and very interested candidate: Microsoft.

Neither Microsoft (MSFT) nor Netflix will comment about such a hookup.

But several sources close to Microsoft told BoomTown that that the partnership between Netflix and Xbox Live to allow users to watch movies and TV episodes on the Xbox 360 device–struck exactly one year ago today–is going like gangbusters, with one saying it was “en fuego.”

Very loosely translated: On fire.

So much so, several sources said, that Robbie Bach–who is president of Microsoft’s Entertainment and Devices division, which includes the Xbox business–has been meeting with Netflix CEO and co-founder Reed Hastings (pictured) in recent weeks about what else the pair can do together to expand its current partnership.

The deal already in place between them is a hit, according to sources at both companies.

It gave Netflix access to 12 million Xbox members and handed Microsoft what has turned out to be a very popular application and an unusually successful joint effort.

While an acquisition would be a much bigger move, some at the software giant think it would necessarily be such a bad one for Microsoft, which has long been seeking to forge better ties in the entertainment arena.

Many of Microsoft’s major Hollywood forays over the years have been duds. So, stronger ties with Netflix–even a more robust partnership, at the very least–would give it a more definitive video strategy most think it lacks.

Its archrival, Google (GOOG), has been trying–with similarly lackluster impact–to accomplish the same results via its pricey and money-losing YouTube unit.

But Netflix–which has an office in Beverly Hills, as well as Los Gatos, Calif.–has much better relationships with the industry there, mostly because it has become such a big buyer of DVDs as it has grown its business (see charts below of subscriber and revenue growth; click on them to make them larger).

In addition, it has added more subscribers than ever in the last year and is solidly profitable, mostly due to sending consumers all those DVDs in little red envelopes.

And while a lot of execs at Hollywood studios that Netflix does business with have been wary–and told me so in no uncertain terms on my recent visit to Los Angeles–about its entry into the digital video delivery business, they have also been thrilled with the checks that Netflix has been writing them since it was founded more than a decade ago.

But, it is that main DVD business that Hastings, in a recent interview with The Wall Street Journal recently, has said is “doomed.”

Noted the article:

“As soon as four years from now, [Hastings] predicts, the business that generates most of Netflix’s revenue today will begin to decline, as DVDs delivered by mail steadily lose ground to movies sent straight over the Internet. So Mr. Hastings, who co-founded the company, is quickly trying to shift Netflix’s business–seeking to make more videos available online and cutting deals with electronics makers so consumers can play those movies on television sets.”

With Internet video still in its infancy–and barely in gestation in terms of any viable business model–Netflix might indeed need help, especially since Hollywood has been slow to give it rights to more movies for online distribution.

That will be increasingly troublesome, given that digital delivery is the way consumers are headed. According to the Journal story, over 20 percent of Netflix members now use the streaming service.

But it only has about 12,000 titles–mostly older films–licensed on its online service, compared to 100,000 DVD rental titles.

That’s because, for now, much more powerful pay channels usually win out over Netflix in these online video distribution wars, which also include Amazon and Apple (AAPL), along with many others.

Thus, even with a strong and unusually long-term executive bench, the close-knit Netflix will still be facing a major battle in moving in a direction it must head in sooner than later

Such an epic journey could be easier for Netflix with a powerful ally like Microsoft.

One more interesting link would make such a relationship even smoother: Hastings is also on the board of Microsoft, having joined in 2007.

So, the savvy and innovative entrepreneur–well-known for his close-to-the-vest dealmaking and eager to not miss a key turn for his company–might very well decide to keep friends very close.

Here’s a longish video BoomTown did over the weekend at the 2009 Sundance Film Festival, the famous annual independent film gathering now taking place in Park City, Utah.

I was there to moderate a panel on Saturday titled, “Where Do We Go From Here? Icons of the Digital Age.”

It was a great session, with a lot of insights as to where things are headed in the online video space and how that would impact the movie industry. Main conclusion: Significantly.

The trio of panelists were: Chad Hurley, the co-founder and CEO of the Google (GOOG) video service, YouTube; Jason Kilar, CEO of Hulu, the premium online video service that is a joint venture of News Corp. (NWS) and GE (GE) unit NBC Universal; and Reed Hastings, founder and CEO of Netflix (NFLX), the largest online DVD rental service, which has been moving into an ever wider range of distribution of movies on the Web. (News Corp. is the owner of Dow Jones and this Web site.)

I did interviews with each of them, as well as a chat with my only indie celebrity friend, Jane Lynch, some scenes from the festival and an intro and outro from my own little stars, Louie and Alex Swisher.

Here’s the video:

BoomTown is headed to the 2009 Sundance Film Festival today, an annual journey I make to moderate panels about the tech industry.

The festival officially opened yesterday in Park City, Utah. And while still largely a confab of independent filmmakers, Hollywood deal types and various celebrities rifling though swag orgies, a lot of geeks are there too.

Since Sundance also has taken a keen interest in all things digital, ATD moves its HQ there for a few days every January, to the New Frontier on Main digs, to talk to those gathered–for what have become standing-room-only events–about whither tech and how and when it is eventually going to eat the entertainment industry’s lunch.

Oh yes, my friend: Silicon Valley will eat lunch in this snowy town again!

And for good reason, given that the entire movie industry has long worried about how digital distribution will impact its business, especially as every year, the encroachment continues at a relentless pace.

This year, we’re going even more futuristic, with a panel tomorrow at noon titled, “Where Do We Go From Here? Icons of the Digital Age.”

In fact, the panelists are that: Chad Hurley, the co-founder and CEO of the Google (GOOG) video service, YouTube; Jason Kilar, CEO of Hulu, the premium online video service that is a joint venture of News Corp. (NWS) and GE (GE) unit NBC Universal; and Reed Hastings, founder and CEO of Netflix (NFLX), the largest online DVD rental service, which has been moving into an ever wider range of distribution of movies on the Web. (News Corp. is the owner of Dow Jones and this Web site.)

Here’s the panel description:

“Remember the world before the Internet, email, and cell phones? Now we try and picture it 15 years from now. If we are currently in the greatest information revolution since the printing press, what can we expect next? How will media, entertainment, and our digital lifestyles change? This roundtable assembles visionaries of the digital revolution to discuss the limits of our imagination.”

It should be an interesting exercise in creative prognostication, although I for one cannot remember the world before the Internet, email and cellphones.

I am also dragging my two young sons there, along with ATD majordomo Ed, so expect lots of filming of our own, with my shaky Flip Mino, to be posted all weekend.

Until then, here’s one of the two videos I did last year, including an interview with MySpace co-founder Chris DeWolfe and a visit to the trendy party he threw on Main Street with my celebrity friend Jane Lynch as tour guide (and she’ll be back this year for another special guest star appearance!):

Tech is getting a lot of attention in Hollywood, so talking about online video is a key area for the independent filmmakers who are here this year.

Topics on the panel were wide-ranging, including: social networking, politics, the writers’ strike and the need for more broadband.

Better yet, here’s the description of the panel:

“The writing is on the wall–the industry must adapt to new media or face extinction. Today’s studios and independents are finally embracing the challenge of porting content and revenue to new distribution strategies. Join Hollywood power brokers and new media superstars to discuss their strategies for the Web.”

The panelists included Ted Sarandos (Netflix), Dmitry Shapiro (founder and CEO of Veoh.com), Dan Glickman (MPAA), Jason Kilar (CEO of Hulu.com), Mike Volpi (CEO of Joost.com), Erik Flanagan (EVP Digital Media MTV Networks/Comedy Central/South Park Studios) and tech strategy adviser Phil Lelyveld.

In other words, me and seven guys, which is about par for the course in Silicon Valley!

Here’s the video:

And here is my video touring the festival.

I just got to Park City, Utah, for my annual visit (well, this will be my third year here) to the famous film festival that takes place in this lovely mountain resort.

While I like a good movie as much as the next person, I am no film aficionado, nor do I have a screenplay stuffed in a drawer, nor do I hope someday to direct. I do like celebrity sightings, of course.

I am here because the Sundance Film Festival has understood early and often that technology is becoming increasingly important to the future of the film industry.

Because of that, they’ve been expanding additional offerings in the digital arena with panels throughout the festival.

The panel I will moderate is a great one about online video, called “Webolution!–Hollywood Adapts to the Web.” It will take place tomorrow at 12:30 p.m. at the New Frontier on Main here.

Here’s the description:

“The writing is on the wall–the industry must adapt to new media or face extinction. Today’s studios and independents are finally embracing the challenge of porting content and revenue to new distribution strategies. Join Hollywood power brokers and new media superstars to discuss their strategies for the Web.”

The panelists include Ted Sarandos (Netflix), Dmitry Shapiro (founder and CEO of Veoh.com), Dan Glickman (MPAA), Jason Kilar (CEO of Hulu.com), Mike Volpi (CEO of Joost.com), Erik Flanagan (EVP Digital Media MTV Networks/Comedy Central/South Park Studios) and tech strategy adviser Phil Lelyveld.

Videos, of course, to come, along with visits with various tech players here, who are increasing in number annually. And, maybe, a Hollywood celeb or two.

Yesterday, a source told me that Flixster, the fast-growing social network for movie lovers, was back in talks to be bought by Barry Diller’s InterActiveCorp.

Those IAC-Flixster rumors flew about a month ago and were entirely true.

But no deal, it seems. IAC has apparently found the price too high, according to other sources. But, said these sources, others are still in the game.

So if an acquisition deal does happen, two intelligent guesses to the possible winner for the company with 39.5 million user home pages, more than 1 billion user-generated movie ratings and a sassy motto of “Stop Watching Bad Movies”?

Blockbuster or News Corp.

(Sources said Viacom’s MTV unit gave Flixster a look too, but also thought the price too high.)

The former because the video-rental chain has been mightily trying to break into all kinds of Web markets to give it a place to sell online. Blockbuster has been struggling of late, because of its costly battles with Web sites like Netflix and the growth of video-on-demand and movie downloads via the Internet and cable. Its online subscribership is only 3.1 million.

And the latter, because such a site tucks in nicely with some of the media giant’s properties like MySpace and Rotten Tomatoes, as well as its numerous movie and television arms. (FYI, News Corp. is in the process of acquiring Dow Jones, which is the owner of this site.)

The price? I will wager $150 million in cash that had been previously bandied about, although IAC’s offer was likely much lower than that.

Pricey, yes, since Flixster only has 17 employees and was created less than two years ago. It received $2 million in funding in February from Lightspeed Venture Partners.

But its vibrant Web site is booming and is now one of the largest movie sites on the Internet. Flixster is also one of the more popular widgets on Facebook, with more than 800,000 active daily users.

While Amazon-owned IMDb (Internet Movie Database) is larger in terms of traffic, Flixster is growing much faster.

On the site, users have profiles typical of most general social networks, with a laser-focus on movies, actors, directors and movie quizzes and news. Flixster also has video content, both professional and user-generated and relies heavily on user reviews.

Getting a reported price of under $20 million, according to a report in The Wall Street Journal, will hardly cover costs of upward of $100 million–even “Ishtar” didn’t do that badly.

The compromised Movielink, the bastard child created five years ago by movie studios (Paramount Pictures, Metro-Goldwyn-Mayer Studios, Universal Studios, Sony Pictures Entertainment and Warner Bros.) with too-onerous digital rights management claws, lackluster marketing and high prices, has been widely mocked even by execs at the studios themselves.

When I recently brought it up during a visit to one studio, in fact, an executive there did a most excellent rolling of his eyes that needed no further explanation.

But now it is Blockbuster’s problem to correct, which is mainly how to battle online rivals like Netflix and others chipping away at its business either via mail-order rentals or video-on-demand services.

OK, maybe not, judging from the mini-frenzy that resulted from wispy whiffs of rumors that online DVD renting and downloading service Netflix was in talks to be acquired by online retail giant Amazon. Netflix’s stock popped, of course, on the idea that the company–worth about $1.6 billion–could fetch more than $2 billion in an Amazon bid.

If it were to happen, that is (which my sources said is premature). More to the point, it is part of an endless cycle about what will eventually happen to the sassy Netflix, which can’t possibly survive alone, although it has so far, mostly besting competitors and even making a tidy profit.

But in this buy-or-be-sold mindset, the practice run of such an offer was nicely deconstructed by a most excellent report by Dana Cimilluca of the The Wall Street Journal’s online Deal Journal.

Amazon might make a decent buyer for Netflix (it certainly has had trouble competing with it) and its stock has been up by double in the last year (market cap: $30 billion), giving it a stronger currency to make purchases. On the other hand, Netflix’s stock is down over investors’ concern about increased competition and lackluster recent results.

But one vampire of a merger rumor just won’t die–the sale of social-networking site Facebook–even with a million stakes through its heart, such as my post here. This week, we’re back to Yahoo coming around again to look over the suddenly-hotter-than-ever company and upping the ante to closer to $2 billion.

Hey, rumormongers out there, listen up: This is just not going to happen, as Facebook has just launched a new and possibly promising initiative to broaden its scope by bringing in third-party developers to offer widgets and services to its 22 million users.

So, let me reiterate when you hear this one again–Just say no.