At least one analyst is reigniting the “Apple acquiring Netflix” debate, but any deal that sets a premium on the streaming service’s market value would carry an enormous price tag.
J.P. Morgan analyst Samik Chatterjee said Netflix leads in terms of original content and engagement and that buying the company could help Apple differentiate from other content aggregators.
"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,” Chatterjee wrote in a research note.
Apple is set to become one of the smaller players in the streaming video market, likely later this year. The company has spent about two years assembling a video team—led by former Sony Pictures Television executives Jamie Erlicht and Zack Van Amburg—and assembling a lineup of original series and movies. Apple’s original content along with details regarding its streaming video service are still under wraps but the company is reportedly planning to launch its original streaming content in April.
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Despite the time and money Apple has already sunk into its original video strategy, Chatterjee still thinks buying into the streaming video market is Apple’s best bet. Of course, any Netflix deal would likely carry a premium, and Chatterjee said that if that premium hit 20% over Netflix’s current valuation, then a potential transaction could cost as much as $189 billion.
That’s certainly a huge increase over the reported $1 billion Apple set aside for content acquisition, and it would take a big chunk out of the $245 billion Apple has in cash on hand.
But Chatterjee said that Netflix would be a great contributor to Apple’s service revenues and could potentially chip in advertising revenue in the future. Also, he said that Apple’s plans to enter the streaming video market are going to be an uphill battle.
"Video streaming, including original video content, is a highly competitive market with established traditional media houses as well new entrants fighting aggressively for incremental subscribers, which is likely to make it difficult to scale any new platform to compete effectively,” Chatterjee wrote.