Apple is paying a lot of money for the privilege of going after Netflix. But one set of financial analysts rate it likely that Apple will think more along the lines of “If you can’t beat them, eat them,” by just outrighting buying Netflix. But can Apple pull it off? And more importantly, would Netflix let it happen?
The logic, according to Citi’s analysts, is this: Apple has an ungodly giant pile of money, nearly $250 billion and growing, and thanks to the GOP tax bill, it can now bring that money back to the US without much of a fiscal haircut. Leaving that money sitting in a bank account is probably a bad idea, long-term. Apple should buy something with it, and what could be more tempting than Netflix? Citi rates it as 40% likely Apple will try to just buy itself into the hearts and minds of streaming Americans.
It makes sense, in practical terms. Apple has the money, it wants to get into the streaming game, and really there’s no better position to be in, right now, than to be the owner of Netflix in terms of streaming media. Netflix gets a near-bottomless pile of cash from the most profitable corporation in human history to produce any show it wants and to take on deep-pocketed foes like Amazon and Disney, which will own three streaming services if all its plans come together. From purely objective ivory towers, it’s not a bad idea, for either company. From the ground, though, neither of them will do it. Apple’s unlikely to so much as come knocking much less actually try this.
First of all, Apple already, in its opinion, has a streaming platform, namely Apple Music. Most of Apple’s video content is streaming through Apple Music already and Apple clearly views its shows as an inducement to subscribe to its service. And to be fair, at 30 million subscribers, it may not be doing Netflix numbers but it’s still beating out Hulu and about half that of Amazon Prime. Why spend billions on something that in Apple’s view, it doesn’t need?
Furthermore, Apple wouldn’t enjoy owning Netflix. Apple still clings to a “closed architecture” philosophy where it designs all the hardware and software. Every time Apple has tried to act more like another tech company, you get disasters like the Rokr. Netflix is about getting its app onto as many platforms as possible, anathema to Apple’s corporate culture. To own Netflix, and not destroy it, Apple would have to either shift its entire corporate culture or keep Netflix at arm’s length.
Similarly, what does Netflix get out of being owned by Apple? For years, rumors floated that Disney was close to buying out Netflix, before deciding to pick up Fox instead. Netflix has no shortage of people who’d like to buy it, but as of this writing, it’s worth $87 billion, and any attempt to buy it out would drive up the price even further. It currently sits at heights even some major tech companies can only dream of.
So, unless Netflix’s board decides to cash it in, and unless Apple is about to make some major changes, it’s more likely the two will stay frenemies for now. Then again, six months ago, Disney buying out Fox would have seemed impossible, so Citi’s 40% seems about right. It’s unlikely, just not totally impossible.