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There's a 40% chance that Apple will acquire Netflix, according to Citi analysts cited by Business Insider.
The catalyst could be President Trump’s newly passed tax bill, which will allow Apple to bring back about $220 billion of its cash to the US. Apple would need about $73 billion to acquire Netflix, representing only one-third of the cash it could repatriate to the US. In total, Apple has about $252 billion in cash, mostly in foreign jurisdictions.
Though an Apple-Netflix acquisition is still highly speculative, the deal would make sense for Apple for several reasons:
- Apple is investing in original content, but it still needs a win. The company will spend about $1 billion to create and obtain original video content over the next year, according to The Wall Street Journal. Additionally, in June, Apple hired two top Hollywood television executives from Sony Pictures Television to push its original content offerings. However, Apple has yet to produce a compelling TV or movie offering — Apple’s Carpool Karaoke did not impress critics, according to Variety, while its Planet of the Apps show was "largely lambasted," according to BGR, for example. Additionally, Apple TV held 15% of US market share for streaming video platform devices in Q1 2017, ranking fourth behind Google Chromecast, Amazon Fire TV, and Roku devices, according to Parks Associates.
- Apple would gain access to original content with proven appeal, enabling it to better compete in a video streaming landscape that's becoming increasingly crowded. Seventy-nine percent of millennials polled by startup LendEDU indicated Netflix had the best original content, while this figure was just 4% and 3% for Hulu and Amazon Prime, respectively. Having these sure-fire hits could help Apple compete with new competitors, including powerhouses like Disney, that enter the video streaming market.
- It would give Apple a huge pool of subscribers. Netflix is the most successful video-on-demand platform on the market. In a 2017 survey by IBM Cloud Video, 90% of US consumers reported subscribing to Netflix; only 46% reported subscribing to Amazon Video and 27% to Hulu, Netflix's closest competitors. And Netflix has over 100 million subscribers, while Hulu has about 16 million. Amazon doesn't disclose subscriber numbers for Amazon Video, but the e-commerce giant was estimated to have about 85 million Prime customers in July 2017.
However, some Netflix content could be at odds with Apple's approach to online video. Though Netflix has a catalog of successful original series, not all of its programs are suitable for all age groups. This could be a problem for Apple, which aims to acquire comedies and emotional dramas with broad appeal, instead of shows containing nudity and raw language, according to Bloomberg. Apple may find a harder time justifying a roughly $73 billion price tag for a catalog of content that isn’t fully in line with its long-term content strategy.
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