Investors buoyed by report claiming Apple, Disney are potential Netflix buyers

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Hot on the heels of rumors that Disney was investigating buying social media platform Twitter, now Netflix is said to under scrutiny by Disney and possibly Apple for a buyout bid, allowing either company to greatly expand on media delivery to cord-cutters.









According to R.W. Baird financial analyst William Power, and reported initially by MarketWatch, Netflix has been the subject of heated merger and acquisition discussions as of late, saying that "whether Disney, Apple or someone else, Netflix could become a target."



Disney currently holds a 30 percent share in streaming venue Hulu, having teamed up with Fox, NBC, Time Warner, and Comcast for the effort.



"What Disney has to think about is what is its place in a post cord-cutting world," said institutional investment Monness Crespi Hardt & Co.'s James Cakmak regarding reports that Disney would buy Twitter. "They are investing in technology for distribution -- and this would give them the platform to reach audiences around the world."



Netflix generated $7 billion in revenue in the last fiscal year. Disney created $52 billion in revenue over the same time period, with Apple pulling down around $234 billion.



Since news of a potential suitor for Netflix broke, the stock price for the company is up 3.5%. With little else tangible to go on but rumors by analysts of a buyout investigation, it remains possible that the report is an attempt at stock manipulation by Wall Street analysts.

Apple's video intentions are murky



In an interview in July, Apple's senior VP of Internet Software Eddy Cue stated that the company wasn't interested in becoming a Netflix competitor.



"We're not in the business of trying to create TV shows," said Cue. "We're not trying to compete with Netflix or compete with Comcast."



In the same interview, Cue said that Apple was more interested in building the platform for delivering content more than anything else.



Rumors in 2015 and the beginning of 2016 strongly suggested that Apple was working on its own cord-cutting service for television. The program died on the vine, however, with reports circulating that Apple's aggressive tactics in negotiating deals were the major impediment to the effort.



However, Netflix has a commanding lead in the streaming video which could jumpstart Apple's efforts in the market, holding over 37 percent of the internet's U.S. traffic in 2015. Apple's iTunes accounted for 3 percent of peak download traffic in 2015, finishing in a multi-way tie for fourth place with Amazon Video, BitTorrent, Hulu, and Facebook.
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Comments

  • Reply 1 of 29
    h2ph2p Posts: 264member
    I'm in favor of Apple making this sort of acquisition. I'd say, don't change a thing about the service/management/operations.

    Simply offer a discount to NetFlix to people that buy the latest and greatest AppleTV. With each release of ATV, offer the monthly discount for the life of the person's subscription, for the first 3 months that the new model is offered. I believe it would mean millions & millions of extra sales!

    Boost the sale of ATV's & have all of the various user data/entertainment options, etc.
    frankielolliverwatto_cobra
  • Reply 2 of 29
    h2ph2p Posts: 264member
    Also, I'd recommend, Not changing the name to iTunes/NetFlix. Anecdotally, there are too many Anti-Apple people that may not buy for that reason alone... and it dilutes the brand.

    Although, having an "iTunes features section" on NetFlix could complement the service. I'm not certain how... but there is an opportunity to cross-sell Apple services via NetFlix.

    What if there was an iMessage/iCloud services connection? Sharing favorites, reviews, etc.?
    watto_cobraminicoffee
  • Reply 3 of 29
    jordexjjordexj Posts: 3unconfirmed, member
    If Apple bought Netflix wouldn't this cannibalize their own pay to play TV shows and movies?   
  • Reply 4 of 29
    jordexj said:
    If Apple bought Netflix wouldn't this cannibalize their own pay to play TV shows and movies?   

    Apple isn't making $7 billion/year on their 30% from TV show and movie sales.  I agree with the notion of Apple buying Netflix and not messing it up.  I already pay $10/month to Apple for unlimited music and Netflix $8/month for unlimited TV/movies.  I expect Apple could learn quite a bit from Netflix about how to run a best-in-class media platform.  Too bad they can't buy Netflix with all that overseas money...
    h2pcalilolliverwatto_cobrajony0
  • Reply 5 of 29
    designrdesignr Posts: 503member
    This is one of the major Apple acquisitions rumors that actually makes strategic sense to me.

    First and foremost Netflix is as distribution platform. Secondarily a quality (but very small) content creator. This could fit very well with the TV. It dovetails well with Apple's primary focus of being a device provider while slowly edging into services. This becomes Music but for TV. Furthermore, Apple has the capital that could help Netflix turn on the afterburners.

    Obviously I share the sentiment of "don't screw it up"...Netflix is doing pretty well on their own. But Apple + Netflix could be gold.

    h2pcaliButidonttweetrandominternetpersonlolliverwatto_cobra
  • Reply 6 of 29
    volcanvolcan Posts: 1,789member
    Hot on the heels of rumors that Disney was investigating buying social media platform Twitter, now Netflix is said to under scrutiny by Disney and possibly Apple for a buyout bid, allowing either company to greatly expand on media delivery to cord-cutters.
    The term cord-cutters is troubling to me because 90% of USA households get their internet from a cable company. If people start cancelling their TV service that will make the cost of internet go up. The cable companies are not going to take a loss, plus they might even throttle streams behind the scenes in an effort to make you reconsider cutting the cord so to speak.
    sockrolidcornchip
  • Reply 7 of 29
    designrdesignr Posts: 503member
    volcan said:
    Hot on the heels of rumors that Disney was investigating buying social media platform Twitter, now Netflix is said to under scrutiny by Disney and possibly Apple for a buyout bid, allowing either company to greatly expand on media delivery to cord-cutters.
    The term cord-cutters is troubling to me because 90% of USA households get their internet from a cable company. If people start cancelling their TV service that will make the cost of internet go up. The cable companies are not going to take a loss, plus they might even throttle streams behind the scenes in an effort to make you reconsider cutting the cord so to speak.
    I think your 90% number is an exaggeration. It's more like 50%.

    But more to the point, this is probably an inevitability that the cable companies becomes dumb pipes and not content distributors. We saw something similar to this with cell phone companies in "olden days" when you could only use their apps (primitive as they were back then) and only buy content (e.g., ring tones) through them. This model got destroyed. The wireless companies have become pipes competing on price, quality, service, etc. We'd all love to see more competition of course...but this up to the government to allow it.

    The wired line services (cable and DSL) are less competitive to be sure. But here again...government (more locally in this case) inhibits competition through stuff like cable "franchise rights" (that is French for government protectionism). There could be 3-4 wired service providers in many towns. But this won't happen soon.

    As for people cancelling cable service causing prices of broadband service to rise...yes...possibly. If the cable TV service is, in effect, subsidizing lower cost broadband service (as your statement implies) and that subsidization evaporates and the companies need to charge more directly, it is just a a reflection of the real cost of that service. What we really want is greater competition in the "last mile" area  to help mitigate that. Could come from wireless or wired.
    randominternetperson
  • Reply 8 of 29
    mubailimubaili Posts: 389member
    sog35 said:
    I'm okay with Apple buying Netflix.

    As long as the $60 billion is all in Apple stock
    why? according to Warren Buffet you pay with stock only if the stock is overvalued, and Apple stock is definitely undervalued right now. But I don't see any reason Apple should buy Netflix. Apple could just negotiate with the content owners to offer monthly subscription if they really want to get into the game. I might add I still don't see why Apple bought Beats either.
  • Reply 9 of 29
    calicali Posts: 3,495member
    h2p said:
    I'm in favor of Apple making this sort of acquisition. I'd say, don't change a thing about the service/management/operations.

    Simply offer a discount to NetFlix to people that buy the latest and greatest AppleTV. With each release of ATV, offer the monthly discount for the life of the person's subscription, for the first 3 months that the new model is offered. I believe it would mean millions & millions of extra sales!

    Boost the sale of ATV's & have all of the various user data/entertainment options, etc.

    I would take it a step further and offer one year free with purchase of new AppleTV. Strategically announce a new Apple TV every year and I see millions of people upgrading yearly.

    Since Netflix is available on anything with a screen Apple could subsidize its own users with everyone else's dollars.
    But also,
    if Apple can upgrade the Apple TV with the latest innovations such as A10X processor, 3D Touch, M10 processor, Kinect technology, etc. they can charge a premium and still make a profit for Apple/Netflix with every unit sold. 

    Possibilities are endless:

    Use profit for content creation, intergrate iTunes ("season 4 available now on itunes"), Siri intergration, Apple innovations, offer a Netflix/Apple Music bundle(hello android/Spotify users), 4K jumpstart, future VR avenue etc. etc. etc.
    h2p
  • Reply 10 of 29
    The author made one very credible observation that stood out in this article, "it remains possible that the report is an attempt at stock manipulation by Wall Street analysts." Much more questioning of motive should done by AI and other sites instead of just regurgitating what Wall Street analysts spew at any given moment. This is not the first time Apple has been rumored to considering a Netflix acquisition. It is the first time I can remember reading about Apple and Disney considering a Netflix acquisition. The problem with the rumor is Michael A. Iger, the CEO of The Walt Disney Company, currently is an Apple board member. This means he would have inside knowledge of any Apple acquisition. Using that knowledge to bid against Apple would be a conflict of interest. Disney has never been seen be unhanded in the manner Google was and is win residing on another company's board of directors. And, with Lorraine being the largest Disney stakeholder, Michael's remaining time at TWDC might be shortened.
    h2pcalisockrolidloquiturcornchip
  • Reply 11 of 29
    Don't care who buys them, as lo as they start offering movies again. I mean I love Jessica Jones and Luke Cage, but I bought Netflix for movies, and it has been about 8 months since I watched a Netflix movie. And the catelogue is shrinking. Dramatically. I used to wait a few weeks after a movie hit iTunes to see if it would be a rent, buy, or Netflix. Now I am just buying the movies I want when they come out, because I know there is about a 5% chance at best it will go to Netflix....
    designrrandominternetpersoncornchip
  • Reply 12 of 29
    designrdesignr Posts: 503member
    sog35 said:
    "it remains possible that the report is an attempt at stock manipulation by Wall Street analysts." 

    BINGO. END of STORY.
    Possibly.
  • Reply 13 of 29
    brucemcbrucemc Posts: 1,527member
    Netflix market cap = $45.5B USD.  Revenue ~$7B, and Net Income ~ $141M.  PE = 330. 

    Pay over $45B, which contributes little to the bottom line, on the expectations of selling some more millions of ATV's?  Sounds like Google math, not Apple.
    palominecornchip
  • Reply 14 of 29
    holyoneholyone Posts: 389member
    h2p said:
    Also, I'd recommend, Not changing the name to iTunes/NetFlix. Anecdotally, there are too many Anti-Apple people that may not buy for that reason alone... and it dilutes the brand.

    Although, having an "iTunes features section" on NetFlix could complement the service. I'm not certain how... but there is an opportunity to cross-sell Apple services via NetFlix.

    What if there was an iMessage/iCloud services connection? Sharing favorites, reviews, etc.?
    They should definitely change the name think about it :[ Apple Music] music streaming, [Apple Movies]movie only streaming, [Apple Channels] tv shows sports chanels etc basically what you get on tv, and they get to keep a consistent product identification across all the streaming services, could work no ?
    randominternetperson
  • Reply 15 of 29
    MarvinMarvin Posts: 14,219moderator
    brucemc said:
    Netflix market cap = $45.5B USD.  Revenue ~$7B, and Net Income ~ $141M.  PE = 330. 

    Pay over $45B, which contributes little to the bottom line, on the expectations of selling some more millions of ATV's?  Sounds like Google math, not Apple.
    Time Warner would be a better purchase with a market cap of $61b as they own way more original content (e.g HBO), including games and make billions in net income. Netflix is primarily reselling content from the big content providers and Apple already does this. By owning Time warner, Netflix would be paying Apple. Netflix has a lot of subscribers and has international reach with a good brand but the valuation is too high. They'd have been better off buying them a few years ago. Apple could take Time Warner content international and use a subscription model.

    Apple was supposedly considering a $30/month subscription option and wanted the main networks involved but they didn't agree to it. The downside to the service route is that to get as many subscribers as Netflix, you would typically have to go cross-platform. Apple could easily make a Netflix service with more/better content by charging a 3x higher subscription but only if they can get the audience. The best platform for video is still the TV unit, not small-screen devices and Apple doesn't have a huge marketshare there yet. Even if they targeted Airplay use, there still has to be something attached to the TV.

    If they owned Time Warner and the way to get content was the Apple TV box, they'd boost those sales massively internationally and then they have a solid platform to get other providers like Disney pushing content over it too. They'd be able to manage 100 million Apple TV boxes worldwide with HBO.

    $60b seems like a lot to put out but Time Warner are making just under $4b net income per year now. That could easily pay for itself within a decade if they take their content directly to an international audience. They can merge the Music (and perhaps games) subscription in so that people pay once for all their entertainment and it's always available anywhere in the world and on iPhone/iPad. If they bought Time Warner first and had their original content, subscribers would migrate from Netflix and then their valuation would fall. They'd be able to buy Netflix later when the valuation was more reasonable ($10-15b) and they'd essentially be buying subscribers.

    Apple doesn't really need to buy a content company at all and they've said this in the past. I think it makes sense for the long-term because people will always want content even when hardware upgrade cycles get longer.
    cali
  • Reply 16 of 29
    sockrolidsockrolid Posts: 2,788member
    ... it remains possible that the report is an attempt at stock manipulation by Wall Street analysts.
    You can say that again.
    Don't hold your breath.
  • Reply 17 of 29
    geekmeegeekmee Posts: 320member

    "...I still don't see why Apple bought Beats?"


    1.) Unique Deal; competitors could not the deal.


    2.) Crediblity & Insider Contacts: Dre and Iovine have marketing muscle among artists and the record industry.


    3.) Identification, access & delivery of the most fervent market buying music; rock & funk.


    5.) Beats headphones had an established market sound that uniquely separated them from competitors.


    5.) Bought for a discount; Beats had generated yearly revenues near a billion; arguably the rule of thumb for most sales is ten times earnings


    Beats hardware was just frosting on the cake.


    For the above reasons, I believe it was a brilliant and uniquely competitive move, that NO ONE saw coming.

    lollivercalidesignrcornchip
  • Reply 18 of 29
    fracfrac Posts: 480member
    " it remains possible that the report is an attempt at stock manipulation ...'
    @AI Please tell me your tongue was firmly planted. 
  • Reply 19 of 29
    paxmanpaxman Posts: 4,595member
    I could see Apple buying Netflix but from a user perspective it wouldn't improve much. Netflix is awesome as it is. When a new series comes out that i can't wait for I use iTunes.  Merging the two services under one name could get very messy. I am not sure it would make much sense for Apple to buy Netflix and keep it like it is - there would have to a be an end goal.
  • Reply 20 of 29
    19831983 Posts: 1,172member
    If Netflix is indeed up for sale, I hope its Apple that purchases them and not Google, Amazon or Comcast. Disney might be okay as overall they seem to have a good relationship with Apple. But as they already have a big stake in competing platform Hulu it might be a conflict of interest of sorts for them. But a better fit for Apple.
    edited October 2016 calicornchip
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