Apple will not buy Disney, no matter how often it hears that it will

Posted:
in General Discussion edited November 23
The rumor that Apple will buy Disney is old enough to buy an overpriced beer at EPCOT. And, it's back again, with so many talking heads strangely inspired by Disney re-hiring Steve Jobs' friend Bob Iger as CEO.

Are you ready to see an Apple logo on the front of Cinderella's Castle?
Are you ready to see an Apple logo on the front of Cinderella's Castle?


It is true that Disney has just re-hired Bob Iger as its CEO, three years after he stepped down. And it's true that during those three years, Iger said there had been a point where a merger between Disney and Apple could have "gotten there."

Only, you have to forget that Iger also said this was when Steve Jobs was alive. Very specifically, the two men had never once spoken about a deal.

That's apparently not an important detail. At least, not if you're a financial analyst who knows the true value of a good headline.

That's solely what this claim of Apple buying Disney comes down to. It is the statistics and the financial analysis of how much attention you can get by saying it will happen.

It won't.

"He's [Iger] going to sell the company," a source described as a Disney insider who used to work for Iger, told Yahoo Entertainment. "This is the pinnacle deal for the ultimate dealmaker."

Maybe this really was a Disney insider. Maybe it was someone passing by in a Star Wars Stormtrooper outfit. The latter seems most likely, since when they shoot, they don't hit anything either.

We've been here before and we'll keep coming back

Either way, this is only the latest in a very long line of claims that Apple is certain to buy Disney and do so absolutely any day now.

At one point an analyst did actually do some math. In 2017, analyst Amit Daryanani said there was a "confluence of events" that meant Apple should buy Disney.

That was "should," not "will," but Daryanani made it sound like Tim Cook would be an idiot to not do it. And -- remember this was 2017 -- Daryanani's calculations said Apple would have to take on significant debt to do it.

Flash forward to 2022, and now Apple has so much money that it's easy to assume it can buy anything.

Right now, the Walt Disney Co's market capitalization is $175.4 billion. Apple has cash reserves of around $200 billion, according to Investors.com, which also believes the company should be giving that to investors, "the rightful owners," instead of acquiring firms.

So on paper, Apple has the money to buy Disney, whether or not it would be wise to cut down its cash reserves that much. In practice, too, it would not cost Apple $175.4 billion to buy Disney, it would be more.

You don't get to buy a company for exactly what it appears to be worth now, or there is no reason for the firm to let you buy it. Still, let's assume Apple could get Disney for something less than the $200 billion it has in loose change.

Steve Jobs and Bob Iger in 2007
Steve Jobs and Bob Iger in 2007

It's not just the price tag that matters

There's also the slightly significant fact that Disney has no real reason to want to sell. Companies can be pressured into a sale by shareholders, but overall, Disney is doing well when looked at as a whole.

And, while the fans are excited about Chapek being gone, it's likely to be more about the board wanting to make more money, and the company having a COVID fall-guy than anything else, given that he was mostly implementing programs that Iger built. Iger didn't come back to make a deal with Apple.

Yes, Disney has had a few underperforming years, and some expensive, high-profile missteps. There's COVID, of course, which shut down the parks for a while, and cut the capacity for even longer.

And then, In 2022, Disney's then CEO Bob Chapek originally chose "painful silence" rather than support cast members protesting against Florida's controversial sex education bill.

Chapek did ultimately speak out. And when he did, Florida took revenge by trying to remove Disney's -- and only Disney's -- special tax status, which may or may not work given how Orlando itself feels about it. Ironically, the governor made his announcement that he was going to focus on Disney's tax status, while standing in another area that had a special tax dispensation, much like the Reedy Creek deal.

We'll all see about how that works out in the fullness of time. But, because of that deal, it's believed that Disney has saved tens of millions of dollars in taxes over the fifty years since it was introduced.

There may be more financial fallout from the row with Florida, too. According to BBC News, Republicans in Congress now say they will oppose renewing Disney's copyright on Mickey Mouse in 2024 because of the firm's "political and sexual agenda."

What's at stake there is not quite the Mickey that we know today, or even the one we knew 50 years ago. Rather, the original Mickey Mouse from "Steamboat Willie" back in 1928 could become public domain.

So Disney could face losing the rights to its original Mickey, and it is facing these moves to strip its Florida tax advantages. What was more predictable, though, was that its Disney+ streaming service would prove to be both a success and a problem.

Disney has come a long way since
Disney has come a long way since "Steamboat Willie," and now includes all of "Star Wars."

Two sides to Disney+

The Disney+ streaming service launched in November 2019 and aimed to get between 60 million and 90 million subscribers by 2024.

Instead, it easily beat that by November 2020, after just one year instead of five. (It's intended to be watched on TVs, iPhones and iPads, but you can also watch on a Mac.)

The problem is that the service is still in its early days when it requires investment in technology as much as anything else. Then while it has an enviably gigantic library of material, what drives new subscribers the most is brand-new programming.

And there is little that is more expensive than television programming with, for instance, "The Mandalorian" alone costing around $15 million per episode to produce. There are then other costs such as marketing, and other income such as from toys and the parks themselves, that are not counted at all in the streamer's accounts, but rather in the accounting of the company as a whole.

Disney knew it would lose money with streaming at first, and its financial earnings calls have continually forecast it. But it didn't expect to lose $1.5 billion because of it in the last quarter, up from about $1.1 billion a quarter ago, and $630 billion in the year-ago quarter.

So Disney+ is this massive success that is costing its owner much more than expected. It did very recently raise costs on Disney+ streaming, but not enough to make up $1.5 billion in a quarter.

Maybe the company is vulnerable, though any firm buying it would be taking on the same problems and the same costs.

It's not just up to Disney and Apple

Say Tim Cook burns to see more episodes of "Obi-Wan Kenobi," and Bob Iger is keen to see an Apple logo on Cinderella's Castle in the Magic Kingdom. The two firms are still so huge that any kind of deal would have to go to US regulators.

It's no more certain that they'd get a favorable response than it is conceivable that they'd get a quick one. Most recently, a US judge refused to allow much smaller publishing houses Penguin Books and its rival Simon & Schuster to merge, in what Reuters says was merely a $2.2 billion deal.

In that case, the argument was that merging these two firms would cut competition, and also lower advances for their authors. Disney might want to lower what it pays creatives, but that's what got it into costly hot water with actor Scarlett Johansson.

Bob Iger and his (short-lived) replacement as Disney CEO, Bob Chapek
Bob Iger and his (short-lived) replacement as Disney CEO, Bob Chapek

Apple doesn't buy firms on a whim

We've all spent more on something than we should, just because we wanted it. But we're not Apple, which has no reason to want Disney other than how that would balloon out its Apple TV+ library.

Apple's had the chance to buy libraries of content before, and even reportedly held some preliminary discussions with MGM. But it passed on that deal, and hasn't introduced any others.

Steve Jobs bought Pixar from Lucasfilm because the price was right. Disney bought Pixar because its animation studios were no longer creating the hits that it needed. And then Disney bought Lucasfilm because George Lucas was ready and the price looked good.

So huge companies will buy other huge companies, but only when the price is less than the value they will get from it. Disney is not ready to be part of a larger synergy machine than its own, nor does Apple appear to have any inclination to get into the theme park business, even in part.

Disney is not in a weak enough position to make it a bargain for Apple, nor does it have anything Apple especially needs.

Read on AppleInsider

Comments

  • Reply 1 of 19
    DAalsethDAalseth Posts: 2,409member
    The very last bit is what is most important:
    …nor does it have anything Apple especially needs.
    That is the long and short of it. The two companies can work together, use each other’s strengths, but that doesn’t mean one has to acquire the other. It reminds me of the people squawking about how Apple needed to buy Peloton. There was nothing that Peloton had that Apple needed, and supporting all the Peloton legacy equipment was a headache that Apple didn’t need. Apple can get access to all the Disney stuff they need, the two companies have a good working relationship. But running the theme parks, and Disney Merch stores, Cruises, and all the rest is a headache that Apple does not need. 
    edited November 23 ronnwatto_cobraFileMakerFeller
  • Reply 2 of 19
    Disney DOES have the LARGEST back catalog of content -- Marvel, Mickey Mouse, Star Wars, Lucasfilm, 20th Century, National Geographic, ABC, ESPN, princess movies, Disney channel, Disney+, Hulu, Pixar. WB Discovery in comparison is very, very tiny.

    "We are always looking at companies to buy. We acquire a lot of smaller companies, and we’ll continue to do that for IP and to incorporate talent. We don’t discount something larger if the opportunity presents itself. I’m not going to go through my list with you on this call, but we’re always looking." -- Tim Cook, April 28, 2022

    If there are businesses Disney is in that Apple has no interest in -- parks, comic books, publishing, cruise ships, whatever -- I imagine Apple would divest them or license them to others. On the other hand, if Disneyland became the largest Apple Store ever...

    Disney's market cap is as low as it will go right now. Apple can return its $200B cash on hand to investors or spend it on some iP. Investors are already happy with Apple. And Apple investor Warren Buffett loves Disney. I believe IP is a better long-term choice.
    williamlondon
  • Reply 3 of 19
    badmonkbadmonk Posts: 1,108member
    Yeah one of those strange rumors that has never made sense in any fashion.  Just because Steve Jobs as an independent party bought Pixar does not mean Apple sees anything of worth in Disney.  Disney is just not part of the Apple wheelhouse.  And though Apple has entered the “media business” Apple sees no value in managing large amounts of media much less theme parks and culture wars quagmires involving cartoon characters.

    The purpose of AppleTV media is to sell AppleOne subscriptions not media per sae.   And analysts & the chattering class don’t seem to get this.
    watto_cobra
  • Reply 4 of 19
    macxpressmacxpress Posts: 5,420member
    I still think Apple should buy Disney. Apple pisses away so many opportunities to buy good companies and then someone else ends up buying them. Apple purchasing Disney would benefit both companies, both short term and long term. Sure Apple doesn't need to buy Disney just to have an agreement with them but long term someone else could just scoop Disney up and that agreement goes away. Apple could get Disney+ which I think it needs as well as all of the Disney IP along with ESPN, ABC and Disney/Pixar along with everything else Disney Entertainment. Disney gets Apple's leadership and funding which it badly needs. Disney isn't exactly in financial greatness if you follow them close enough. They've purchased a lot over the years and really haven't gotten a lot out of their investments. Now they're kinda hurting for money to use those investments. 

    Disney parks while yes is not Apple's strong suit, can also just let someone in that area run it so they don't have to worry about it. Comcast, NBC/Universal does this with Universal Parks. It's not like the CEO of Comcast or NBC/Universal manages Universal Parks and Resorts worldwide. They have a complete separate Parks division of NBC/Universal with its own CEO, COO, etc to do that. Yes, the CEO of NBC/Universal does pay attention to what they're doing as a whole and determines funding for its projects but it's not an all day everyday thing for him to manage. 

    Also, Disney Parks while popular is actually extremely low on the totem pole in terms of revenue and profits. It's Disney entertainment is where Disney makes all of its money from not its parks division. The same goes for NBC/Universal. Universal Parks yes makes money and quite a bit and has a great ROI, but their profits are no where near the profits of NBC and Universal's TV/Movie industry. So what I'm saying is Disney Parks doesn't need to be a top priority for Apple. Apple just needs to put good people in charge of it just like NBC/Universal has and that will take care of itself. 

    People seem to always associate Disney strictly with DisneyWorld or DisneyLand but Disney as a company is way more than just Disney Parks and Resorts. 
    edited November 23 williamlondon
  • Reply 5 of 19
    JP234JP234 Posts: 550member
    Screw Disney. Apple should buy Congress. Oh wait a minute…they already do. And they're not alone.
    williamlondonCalamander
  • Reply 6 of 19
    eriamjheriamjh Posts: 1,399member
    I’ve been following Apple since 1997 and I think them buying Disney is the… least likely rumor to come true.  
    Calamanderwatto_cobraFileMakerFellerJP234
  • Reply 7 of 19
    danoxdanox Posts: 1,348member
    badmonk said:
    Yeah one of those strange rumors that has never made sense in any fashion.  Just because Steve Jobs as an independent party bought Pixar does not mean Apple sees anything of worth in Disney.  Disney is just not part of the Apple wheelhouse.  And though Apple has entered the “media business” Apple sees no value in managing large amounts of media much less theme parks and culture wars quagmires involving cartoon characters.

    The purpose of AppleTV media is to sell AppleOne subscriptions not media per sae.   And analysts & the chattering class don’t seem to get this.
    Steve Job was booted from Apple that’s why he bought Pixar and founded Next Computer’s. Neither would have happened otherwise.
    watto_cobraJP234
  • Reply 8 of 19
    I agree. Apple won't buy Disney - for many reasons.
    watto_cobraJP234
  • Reply 9 of 19
    Disney bought Pixar, Lucas, and Marvel as software/IP plays. It obviously has been massively successful for Disney, which lives and dies by its ability to create content. 

    None of the above applies to Apple. It doesn’t need Disney’s back catalog to be successful with ATV+. It couldn’t possibly be interested in running theme parks and cruise ships. Disney has a largely mature business which would diversify Apple, if that was something Apple needed. It simply doesn’t. 
    CalamanderJP234
  • Reply 10 of 19
    Didn't follow this but I guess Iger leaving made Disney so incredibly horrible of late. 

    Not sure how losing a billion dollars qualifies as success. 

    All I know is if I lose a billion dollars, I am considered broke. But OK! 

    Agree overall though, Apple does not need Disney+. ATV content is of a higher quality than Disney. 

    In case the reader does not know what I am referring to, just watch the Hawkeye Marvel Christmas Special. 

    I don't think anything this bad has aired since Chewbacca Xmas special...
    JP234
  • Reply 11 of 19
    Apple should buy a ton of the people that get laid off at other tech co's and start a bugfixing team.
  • Reply 12 of 19
    Apple does not need to dip into a dime of its cash stash to buy Disney. It could easily do an all-stock acquisition. That it could do a cash deal (borrowing at a lower interest rate than almost any other corporate issuer) is just a sweetener.

    Strategically, an Apple-DIsneyContent deal would probably bring some advantages but an acquisition is neither necessary or likely to pass regulatory scrutiny.
  • Reply 13 of 19
    JP234JP234 Posts: 550member
    Instead of buying Disney, why not return some of that spare cash to us investors, who actually OWN Apple?

  • Reply 14 of 19
    MarvinMarvin Posts: 14,836moderator
    logic2.6 said:
    Strategically, an Apple-DIsneyContent deal would probably bring some advantages but an acquisition is neither necessary or likely to pass regulatory scrutiny.
    That seems like the best option, build a content partnership and see how far it goes.

    Disney+ has 164m paid subscribers now, plus 47m on Hulu and 24m on ESPN+.

    If AppleTV+ has 30m paid subscribers, they could get Disney to roll AppleTV+ originals into their service for an extra $1/month so Disney+ goes from $7.99/month to $8.99/month and Apple makes the same revenue minus the marketing budget.

    If Apple feels they can grow AppleTV+ much further then it would be better to stay separate but it would work pretty well and it can be branded separately. Apple can sell AppleTV+ for $8.99 and get all Disney+ content (Disney can perhaps get less of a cut if Apple makes the sale) and Disney+ just gets all AppleTV+ content.

    This helps expand the content reach and subscriber base for Disney too, they aren't available in all the countries Apple TV+ is.

    This is much like how you get EA's game subscription with Microsoft's GamePass.

    Apple could always add additional packages for sports separate from the main content and have cross-promotional marketing in both Disney+ and Apple TV+.
  • Reply 15 of 19
    macxpressmacxpress Posts: 5,420member
    JP234 said:
    Instead of buying Disney, why not return some of that spare cash to us investors, who actually OWN Apple?

    Because it makes better business sense to buy a great IP that will make your stock worth even more longterm. 
  • Reply 16 of 19
    macxpressmacxpress Posts: 5,420member
    I agree. Apple won't buy Disney - for many reasons.
    Nice very generalized statement lol. Many reasons such as???? 
  • Reply 17 of 19
    JP234JP234 Posts: 550member
    macxpress said:
    JP234 said:
    Instead of buying Disney, why not return some of that spare cash to us investors, who actually OWN Apple?

    Because it makes better business sense to buy a great IP that will make your stock worth even more longterm. 
    You have a good point, but with one important caveat: that great IP MAY make your stock appreciate. There is no guarantee that it WILL. And as far as I'm concerned, I'd rather have a bird in the hand than maybe/maybe not two in the bush, at some indeterminate future date. Disney is a volatile and high risk company, that really adds no value to Apple, which has not only the most loyal customer base in the world, with incalculable intellectual property, hardware, software, systems and services. If Apple won't pay me a special dividend, then I'd prefer we grow the operations we already own, rather than attempting to buy it from some other entity. (And that DC universe is a cash-burning turkey compared to Marvel's).

    You may be right. But history shows that most attempts at growth through acquisition ultimately fail. (Take a look at the Time/Warner/AOL example).
    watto_cobradanox
  • Reply 18 of 19
    JP234JP234 Posts: 550member
    Didn't follow this but I guess Iger leaving made Disney so incredibly horrible of late. 

    Not sure how losing a billion dollars qualifies as success. 

    All I know is if I lose a billion dollars, I am considered broke. But OK! 

    Agree overall though, Apple does not need Disney+. ATV content is of a higher quality than Disney. 

    In case the reader does not know what I am referring to, just watch the Hawkeye Marvel Christmas Special. 

    I don't think anything this bad has aired since Chewbacca Xmas special...
    Guess you didn't see Wonder Woman 1984. Never thought I'd hate a movie starring Gal Gadot, but what a turkey. Even worse than Hunger Games! Think I'll pass on Hawkeye!
  • Reply 19 of 19
    danoxdanox Posts: 1,348member
    JP234 said:
    macxpress said:
    JP234 said:
    Instead of buying Disney, why not return some of that spare cash to us investors, who actually OWN Apple?

    Because it makes better business sense to buy a great IP that will make your stock worth even more longterm. 
    You have a good point, but with one important caveat: that great IP MAY make your stock appreciate. There is no guarantee that it WILL. And as far as I'm concerned, I'd rather have a bird in the hand than maybe/maybe not two in the bush, at some indeterminate future date. Disney is a volatile and high risk company, that really adds no value to Apple, which has not only the most loyal customer base in the world, with incalculable intellectual property, hardware, software, systems and services. If Apple won't pay me a special dividend, then I'd prefer we grow the operations we already own, rather than attempting to buy it from some other entity. (And that DC universe is a cash-burning turkey compared to Marvel's).

    You may be right. But history shows that most attempts at growth through acquisition ultimately fail. (Take a look at the Time/Warner/AOL example).

    The Pixar, Marvel honeymoon is over for Disney.
    JP234
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