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Apple And Netflix: Is There Any Truth To The Rumors?

This article is more than 5 years old.

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Rumors about Apple buying Netflix, which could put the seal on its move into services, date back to October 2016, when Ben Thompson explored the possibility, concluding that it would make a strategic fit for both companies (although he then reconsidered his view about a year later).

Such an acquisition would be ambitious to say the least, but not beyond the bounds of the possible: Netflix’s stock market valuation is ​around $156 billion, which with a reasonable premium, would probably put the total acquisition between $190 and $195 billion. Apple has more than enough cash, estimated at around $285 billion, allowing it to buy Netflix without breaking the bank and bearing in mind that Apple just keeps generating cash consistently.

Furthermore, Apple already has experience in the world of content: Steve Jobs helped turn Pixar into a multi-billion dollar success; the company has developed its own content business, valued at approximately twice that of Netflix, and has persisted with the not-very-successful Apple TV, which it is now going to be featured on Samsung television sets, all of which indicate Apple’s interest in growing its content business.

Netflix, founded by Reed Hastings, is a fascinating case study. It’s strategy has allowed it to adapt to a fast-changing technological scenario and to carry out an orderly and visionary transition from a mail-based model to streaming, and from there to create one of the most important content factories in the world, not only in quantitative terms by combining global and local productions, but through high-quality creations that have earned it multiple industry awards. It’s been a high-cost, high-risk strategy, the key to which has been the development of a sophisticated data model that lets it know what its customers want and that has proved much more successful than the approach taken by its rivals, which is either based on blind faith or the visionary ability of so-called experts. If any company represents the disruption of traditional television, Netflix is that company.

But things are not that simple. The other component of Netflix’s success is a strong corporate culture based on trust and open information, which its founder defines as the opposite to Apple’s model, which could be the main obstacle to a deal that many analysts say Apple should press ahead with. Hastings’ confidence in his model, along with his pride and personality would be another obstacle to a possible acquisition, which could lead to a hostile takeover, with all that entails, followed by a difficult post-acquisition phase. These factors could prompt Apple to create its own Netflix, which Disney decided to do, or to go for functional acquisitions such as Texture for its future news service, or else simply to buy minor players.

Whether the rumors will be borne out and Apple will buy Netflix will undoubtedly depend more on this kind of fine-tuning than on strategic considerations that, without a doubt, fit perfectly into Apple’s agenda. But just because two pieces fit together in theory doesn’t mean they will do so in practice. Only Tim Cook knows whether Apple will try to acquire Netflix. In short, things are not usually as simple as some analysts make out.

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