Investors buoyed by report claiming Apple, Disney are potential Netflix buyers
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.
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.
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.
Comments
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.
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.?
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...
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.
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.
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.
Don't hold your breath.
"...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.
@AI Please tell me your tongue was firmly planted.
How quickly we forget what Apple is supposedly about — making great products to improve peoples' lives, now with services included to make the products function to their fullest, again to make our lives better.
Entertainment doesn't inherently make our lives better, in fact it's easy to argue that it makes our lives worse, as in less authentic and less connected to the real world.
I hate the word "content," and I hate the idea of "consumers of content." The world is falling apart. We got serious work to do figuring out how to set things a little more right again. Sony should never have bought MGM or whatever it was that they choked on and lost their way on.
Apple should stay away from the entertainment "industry." It's poison to the vision they have for their mission. Furnishing better platforms is as close as they should get, because platforms can carry good stuff, if ever the obsession with being entertained starts to diminish.
I'm against Apple getting any further into the Content Provision/Creation game. I'd really prefer it if they (and Google, and Amazon) just provided a platform to deliver content, and left the actual creation and provision of content to other parties, like Netflix, TV networks, etc. It's the merging of content creation and delivery channels that's caused the mess that the US cable market is at the moment.
Of course, with the various deals involving Apple and Disney means they already have some involvement. And with the deals between Marvel (now a part of Disney) and Netflix, it would seem Apple would be a logical choice to buy them.
" Netflix and chill "
Netflix is a commodity. Heck AppleTV competitors have a damn Netflix button. Buying Netflix would be a slap in the face to all competitors.