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Could Apple swallow Netflix in one $80 billion bite?

Contributed by
Jan 2, 2018

Now that Disney’s taken over 21st Century Fox, anything seems possible in the world of entertainment mega-mergers. So how about we start 2018 with another potential mash-up that’s got some analysts intrigued: Might Apple offload billions in newly freed-up overseas cash to buy Netflix?

Analysts with investment banking monolith Citi are predicting there’s a decent chance that Apple will do exactly that. Business Insider reports the analysts are pegging that chance at 40 percent — way ahead of the likelihood Apple might use its wealth to snap up other hot companies like Tesla, Hulu, or a handful of video game publishers.

If the idea of seeing an Apple logo when you fire up Netflix makes you pause and say “Whoa,” it should. For now, it’s the kind of talk that’s only happening among analysts — and not between Apple and Netflix (so far as we know). But Netflix has become the giant elephant in the entertainment industry’s room, forcing competitors either to step up their streaming content game, go home, or — perhaps — buy what’s already working.

If Citi’s visionaries get this one right, it’s the kind of deal that would be positively seismic. For perspective, Disney’s buy-up with Fox was worth $52.4 billion. So how much is Netflix worth? It fluctuates, since it’s pegged to Netflix’s stock price, but the company’s market value pushed past $80 billion in 2017, and is expected to scrape the $100 billion mark if its stock continues to rise.

Apple’s got two big reasons to go after Netflix. The first: to put aside its hesitant, half-committed attempts at cracking into the streaming business and instead crash the party like the Kool-Aid Man.

Apple tried to get serious about streaming back in August of 2017, setting aside a reported $1 billion to develop new original content and buy up existing programs. That money helped Apple lock down an order for a reboot of the Steven Spielberg executive-produced Amazing Stories, as well as a coveted scripted drama about morning TV shows set to star Jennifer Aniston and Reese Witherspoon. Apple is also developing a new space opera from Battlestar Galactica's Ronald D. Moore.

But that kind of effort is a drop in the bucket compared to the major players, leaving Apple way behind Netflix, Amazon, and even HBO, according to Variety. And Apple’s method of content delivery — while robust and market-defining within the iPhone and Mac ecosystems — doesn’t align with the way viewers are currently streaming Netflix and its competitors. As it stands, in other words, Apple is having to innovate its way into a space where the Netflix model is already dominating.

The other reason the analysts at Citi think Apple could target Netflix? Get this: The Cupertino company has a problem, and that problem is literally too much money.

Apple has more free cash than it knows what to do with, and buying Netflix would be a way for it to offload more than $250 billion in newly repatriated earnings it’s been holding overseas. While recent changes in federal law have made it appealing for Apple and other companies to stop sheltering their overseas earnings, we definitely aren’t here to talk high finance — but you can read more about it here.

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