There are some Apple rumors that simply refuse to die, and the notion of Apple acquiring Netflix is one of them. In a new research note from JP Morgan, analyst Samik Chatterjee suggests that Apple should use its growing cash hoard to make a bold acquisition in the media space, with Netflix in particular being an attractive target.
“We think Netflix is best strategic fit on leading position in engagement level as well as original content, differentiating itself from pure aggregators of content,”Chatterjee said in a note picked up by CNBC. “We believe there is value to acquiring the most successful player in this space, which is hard to replicate with a smaller player in this market.”
On the surface, this seems like a decent idea. Apple, after all, is trying to make moves in the original content space, with the latest rumblings from the rumor mill suggesting that the company’s nascent TV streaming service will launch sometime in mid-April. So rather than starting from the bottom in an already crowded market, the reasoning goes that Apple might be able to leapfrog the competition and make a huge splash by simply buying Netflix, the current king of streaming.
Again, it may sounds like a solid idea on the surface, but it’s not something that Apple would realistically consider for a variety of reasons.
First off, the acquisition itself would be gargantuan. Netflix currently has a market cap of $152 billion, a figure which would theoretically result in Apple paying upwards of $189 million for the company once you factor a hefty premium into account. Apple, though, doesn’t make outlandishly expensive acquisitions. In fact, Apple’s $3 billion purchase of Beats a few years back marks the only time in the company’s long history that it has spent more than $1 billion on an acquisition.
Put simply, if Apple were ever interested in acquiring Netflix, it missed the boat a long time ago.
Second, the reality is that Apple can easily transform into a media company to be reckoned with for a lot less money. Consider this: a 10-episode run of Game of Thrones reportedly costs $60 million. Not too long ago, a 13-episode run of Mad Men cost $39 million. That said, Apple — with billions in the bank — could more economically invest in high-end content and churn out an impressive selection of programming without having to spend nearly $200 billion in the process. Indeed, this is what Apple is doing already with its upcoming slate of nearly 25 original programs. In short, Apple isn’t looking to acquire Netflix as much as it’s seeking to compete with it.
Would Apple acquiring Netflix be a bombshell development? Without question. There simply isn’t any evidence or reason to believe it’s in the works, the lofty speculation of financial analysts notwithstanding.
Lastly, there’s no indication that Netflix would even be interested in selling to any entity at all. The company continues to rack up subscribers, its share price is on the rise, and the company is better positioned for financial success than ever before.