“‘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.”
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