“‘Content is king’ is now the prevailing mantra in subscription businesses. Investors will casually remind you whenever they need to feel good about their positions,” Richard Saintvilus reports for TheStreet. “But they forget that there’s no content without money. And very few companies can stack their wallet side by side with Apple’s and feel confident.”
“To that end, while Netflix does have a strong content library, the stock has traded as if that library is filled with history books. Investors have begun to wonder if there’s a future,” Saintvilus reports. “Netflix stock closed down 2.13% Tuesday at $370.84. Although the stock is up roughly 1% on the year, shares have plummeted 13% in two days. Investors aren’t wasting time.”
“With investor fear rising about Netflix losing a substantial portion of its customer base, [Apple] should go after Netflix now and use its offer with Comcast as leverage. If Apple is successful at improving viewer engagement, Netflix may see a mass exodus of its customers,” Saintvilus reports. “Apple needs Netflix and its 44 million subscribers. With Netflix projecting to growth subscribers by another 3.85 million in 2014, Apple would acquired close to 48 million viewers worldwide. With Netflix’s market cap right around $22 billion, an offer for $28 billion, or 30% premium to Netflix’s Tuesday closing price would get this deal done. And to think, it would take just 17% of Apple’s cash to pick off Netflix, the most dominant name in the streaming business that still has years of member growth ahead.”
Read more in the full article here.
I wouldn’t mind if Apple made this move.
I wouldn’t mind it, either …heaven forbid someone like eric buy it just to spite tim’s peeps.
Hi, I am long Netflix at the moment and its down, big time.
So I am pumping it by suggesting that Apple (which does not buy expensive one focus companies) should buy it……well….. cause it has the money…….overseas.
Netflix is already on Apple… TV. I watch it regularly. Why should Apple spend money on something it already has???
Just saying.
Because Apple doesn’t really have it…
it is merely a connection to view.
If Apple owned Netflix the profits goto with Apple and Apple could make it exclusive to the Apple eco-system. And furthermore, Apple could control the look and feel of Netflix hence bettering it.
rdiddly,
Nice comment. While I may not agree, you stated clearly that it was your opinion. “I wouldn’t mind” People may disagree but should not down vote because of that.
Just my feeling.
They may not be down-voting him and could just be giving him one, two, or even three stars for his contribution.
Be positive Norm.
There are people on here who don’t go directly to the 1 or 5 star option. It’s been my experience, those people are usually the extremists among us.
The fanboys give 5 to everything pro Apple and the haters use 1 almost exclusively. So everyone averages 3 stars if two fanboys vote.
NFLX would hardly make a dent in Apples revenue. A lot of off balance sheet obligations for content. Most movies I want to watch are not on streaming at NFLX. NFLX uses AMZN for hosting. For what it costs to buy, Apple could build a dedicated server farm and buy a lot of content.
Revenue is revenue – but yes I agree Netflix would not BOOST the Apple charts far an beyond anyone dream.
However, control of content and offering content geared to the Apple way – would be appealing and definately since Apple doesn’t offer much of its own persay – it would boost Apples offering list. In addition, Netflix has been creating some exclusive NETFLIX content which is rather good. Apple should be interested.
What assets do Netflix own? They have no pipes and they basically lease movies. It’s not worth much.
Orange is the New Black, Hemlock Grove, House of Cards ect may not be your thing but they are very popular and something I would call an asset not to mention the talent involved in creation.
IMO they should buy Netflix, let them run as they are and just pump some more money in to the original content. Make it iTunes only distribution.
The assets you mention are not worth 28 or 22 billion nor (IMO) is each subscriber worth $500. (22B/44M)
“The assets you mention are not worth 28 or 22 billion…”
Oh, you might be wrong. The studios see real value in Netflix. I foresee a day when direct delivery for new releases will bypass movie houses altogether.
It will be a remarkable moment to be witness to the last motion picture making its way to the last movie theater before it’s either shuttered for good, or they become novel movie houses for the nostalgic among us.
iTMS and Netflix will transcend the movie goer experience and the major studios, those who survive anyway, will finally sell their content directly to the consumer at a prices we now pay at the theater. And no, just because there is no theater overhead to factor into ticket prices, the studios will not budge an inch on the price you’re now paying to see a new release movie.
By the time the theater is dead, movies will become even harder to produce as cost-per-picture skyrockets.
Long term, Netflix is golden, as is iTMS. In fact, hundreds of outfits will jump on the content delivery bandwagon. They won’t last. Leasing content is competitive and even smaller outfits could compete, but they will be at the mercy of the pipes and those who own them.
The “last mile” will become extremely expensive until an alternative to broadband is realized.
They have no pipes, we all know that. But you’re wrong about NetFlix’s (NFs) value.
Surely you realize they have been acquiring and producing original content? They’ve been making deals with major studios to provide a venue for movies and television programming that otherwise might not make it to anyone’s television set.
For example, Marvel Television signed a deal for a 13-episode miniseries for NF. Disney has also made a deal to produce Star Wars: The Clone Wars for NF.
House of Cards, Hemlock Grove, and Orange Is the New Black is an exclusive that has given rise to NF’s popularity. The also have Lilyhammer and a will produce the 4th season of Arrested Development.
As far as their movie content library they have locked in exclusive deals with Relativity Media and Dreamworks. Showtime has locked in pay-television rights, after HBO left and the Weinstein Company, Pixar, and FilmDistrict have been supplying movie titles, as well.
So original content is king and without a doubt and all of the content providers believe NF is a valued source for additional revenue streams.
If anything, Apple has no original content in production, media wise, nor do they own any pipes. But buying NF won’t solve anything.
Without doubt, they do have the largest aggregation of entertainment on the planet sitting in their servers but the fact is, until Apple can bypass the pipes they will always be dependent on a third-party for content delivery.
A fleet of Apple satellites would provide the ideal walled garden and future proof Apple’s foothold in content delivery.
Just read this… you got it G4Daulage !!!! BRAVO
I wouldn’t mind it, either. But anytime someone says “Apple should/needs to do X,” my immediate reaction is to vomit in my mouth a little.
The question is, does Apple NEED Netflix? If they can figure out a way to do the job better, they already have their entire iTunes consumer base. And doesn’t the iTunes consumer base dwarf that of Netflix? Why spend millions (or billions) of dollars on Netflix when they can just come up with their own unique spin on the service?
“But anytime someone says “Apple should/needs to do X,” my immediate reaction is to vomit in my mouth a little.”
By now you must resemble that girl from The Exorcist.
Apple is only interested in premium content. Netflix would bore the hell out of them
It’s my understanding that Netflix’s content agreements are null and void if the company is bought by another; as in, the agreements are with NETFLIX, not some other entity. So it would all have to be renegotiated… which is basically what Apple has been doing already. So… what’s the benefit again?
If Apple makes this Comcast deal, why would it need Netflix? Maybe if Comcast falls through, Netflix is an option.
Apple’s iTMS and Netflix are the same basic operational process, so why would Apple buy them if all it does is increase the size of iTMS and cause layoffs?
I remember when Netflix was exclusive to the Windows platform and when they finally agreed to offer content to Mac users, many of whom already had DVD accounts, found it to be a pitiful experience.
Apple needs Comcast, not Netflix.
@silverhawk–
Did you read the article? Their biggest asset is their subscriber base.
Which Apple easily dwarfs with iTunes should they choose to enter the same game as Netflix. Otherwise, what would Netflix bring to the table?
Also a lot of those Netflix subscribers are already Apple customers watching Netflix with Apple TV (and paying using iTunes account). What Apple should do is hedge their bets and give Netflix a couple of million to get a contract that guarantees Netflix will be available on Apple TV for 10 Years or so, just in case Goole or Amazon buy them out.
That’s not a asset compared to iTunes.
Netflix is like iTMS, both provide streaming content from their own leased libraries.
But for you to postulate Netflix’s 44-million subscribers who download NF content is not an asset, or comparable to iTMS is ludicrous
An asset is an asset no matter how small. I don’t think anyone is questioning how small Netflix is compared to Apple’s iTMS, except you.
Name another content provider like iTMS who is more successful than Netflix?
If Apple is numero uno, then Netflix is second to none.
Their subscriber base that can cancel without notice! NOT worth $28 billion. Sure they own some original content, but not $28 billion worth. There are MUCH better companies to buy if Apple has $28 billion burning a hole in their pocket.
This broken idea again? For those of you who missed it last time, here’s why this will never work:
Netflix has to negotiate and pay the rights for all the video they stream. Netflix is relatively cheap because they negotiate good deals from the TV and movie companies – these companies are only willing to do this because Netflix is an independent company that does little else besides video streaming. They see Netflix as just a distributor, not big enough to be a competitor or a serious threat to their media empire. If Apple were to buy Netflix, they would have renegotiate all these content deals all over again. TV and movie companies would ask for significantly more money from Apple for streaming rights, and even refuse to give them much of the content, because the video industry as a whole is afraid of Apple and their ecosystem dominating digital video the same way Apple currently dominates the digital music industry with iTunes. Therefore, an Apple owned Netflix would cost more, have less content, and at that point Netflix would no longer be a viable business.
I hate it when people say things I hate, but they’re right
Exactly. If Apple wanted to provide the same service as Netflix they could do this for much less than 28 billion. The problem with Apple pursuing this model is they know it would cannibalize iTunes movie/TV content sales and not increase revenue not to mention the contract negotiations (increasing rates) every few years. For anyone that doubts this consider iTunes Radio impact on music sales.
I agree. Except for a few original series they’ve developed, they’re just a streaming service with contracts negotiated with content owners.
It’s also a false assumption that the Netflix subscribers are a mutually exclusive set with iTunes users. I’ve had both for years, because Netflix provides a cheap streaming alternative to old TV shows, which iTunes can’t match.
Except for their currently cheap rates, which would end if Apple bought them, I really don’t see any benefit otherwise to Apple’s customers.
Why, exactly, would their cheap rates end if Apple were to buy them?
A good point. I guess I just assume any Apple subscription service would rise to be consistent with their current on-demand rates.
“Apple [should/must]…” = slow news day, editor demanding publish or perish.
$28 billion for Netflix? These guys must be smoking something really good. If Apple wanted that market they would be better off doing similar deals with the studios for a tiny fraction of that cost rather than to buy Netflix. But if Netflix’s business model is at risk of faltering why would Apple want to do either. This is a classic example of bipolar logic. It makes no sense. Nothing to see here. Move along.
I’d rather Netflix stays as it is. £5.99/month regardless of how much content you watch is very good value. I couldn’t see Apple maintaining it at that price point, nor keeping it as universal as it currently is (most Android tablets excluded of course).
Yes Apple should buy them, but not at that price. Roll out a better service as appears to be the current plan. Once Wall Street panics that Netflix is losing subscribers to Apple, the price will plummet and be a much better deal. Let’s face the facts that if Apple buys them it would be for licenses, patents, and their small content library. The service itself would be shut down just like P. A. Semi was. Just read through the “List of mergers and acquisitions by Apple” Wikipedia page, and try to find a company that persists after Apple buys them.
If Netflix is doing what Apple wants to do in media distribution and creation then, Apple has to buy Netflix before someone else does. If Apple has its own idea on how to distribute and create media they are better off doing it themselves. I think iTunes was a great primer for Apple to take the next step.
There is no reason to believe that the contracts Netflix has with content providers would remain valid on the case of an sale , in fact it would be surprising if it would. Making an Apple buyout useless.
Netflix made about $48 m profit last quarter.
(i.e at that rate It’ll take about 150 years for apple to recover 28 billion investment).
Netflix has a bloated P.E of 200 plus
Apple has a P.E of 13
BTW:
I wonder whether the author realizes how big $28 billion is.
That 28b comes from PROFITS not revenue.
Amazon’s profit for the giant Christmas quarter worldwide was $239 million. ( with a ‘m’ ).
Lenovo, the world’s largest PC maker’s, was 265 m (with a ‘m’ ).
Just because Apple has 150 b plus doesn’t mean it came easy. Just saying because I keep reading articles of Apple should by this or that for xxx billion….
Buying NETFLIX is a bad idea. Increased competition is going to drive up digital rights costs to where NETFLIX has to increase prices. That’s when it’s su base will dramatically decline. It makes more sense for Apple to buy HULU for a fraction of that cost. Apple just needs to wait for the Fed to nix the Comcast deal of TWC & they can get the internet infrastructure they need for a bargain as well.
Apple needs to decide whether to convert their cash to BRIC currencies or buy things while the US $ still has some value to it. Hyperinflation in the US is just decades away when it collapses from it’s debt burden.