Apple could acquire Netflix and finally make its big splash in streaming

According to analysts from Citi, there is a 40 percent chance of Apple acquiring Netflix. Apple will have a cash surplus after US President Donald Trump announced a cut in corporate taxes, which could help it make the acquisition of the streaming company.

By Adamya Sharma | Published 02 Jan 2018 12:50 IST
HIGHLIGHTS
  • According to analysts from Citi, there is a 40 percent chance of Apple acquiring Netflix. Apple will have a cash surplus after US President Donald Trump announced a cut in corporate taxes, which could help it make the acquisition of the streaming company.

Apple could acquire Netflix and finally make its big splash in streaming
Apple could acquire Netflix and finally make its big splash in streaming

In news that’s causing quite a stir in the streaming industry, Cupertino-based tech giant Apple might be readying to acquire streaming service Netflix.

According to Citi analysts Jim Suva and Asiya Merchant, there is a 40 percent chance that Apple will buyout Netflix. Apple’s potential mergers and acquisitions were ranked by the two analysts in a report shared with clients, which also highlighted Netflix as a potential purchase.

The note from Citi was written prior to the announcement of Disney’s $52 Billion deal to buyout 21st Century Fox. The said note by Citi had mentioned a 20-30 percent likelihood of an Apple-Disney partnership, and a 40 percent likelihood of an Apple-Netflix deal.

Apple’s bid to acquire Netflix rests upon its ability to bring surplus cash from overseas markets back to the US after the Trump tax cut. A cut in corporate taxes combined by a one-time allowance for companies to bring back cash stored in overseas markets without a major tax levy, will have Apple plush with about $252 Billion in cash.

"The firm has too much cash – nearly $250 billion – growing at $50 billion a year. This is a good problem to have," Suva and Merchant informed clients. "Historically, Apple has avoided repatriating (getting back to own country) cash to the US to avoid high taxation. As such, tax reform may allow Apple to put this cash to use. With over 90% of its cash sitting overseas, a one-time 10% repatriation tax would give Apple $220 billion for M&A or buybacks."

What Will Netflix’s acquisition mean for Apple?

Apple is already planning a noteworthy entrance into the streaming space with original content. The company is reportedly backing an anthology series by Steven Spielberg and an untitled drama series starring Reese Witherspoon and Jennifer Aniston.

In August, it was also reported that Apple plans to spend around $1 Billion to create original streaming content for its customers. Apple’s streaming slate is reported to be a conservative one, focussing on family-friendly content. There is also no indication of where Apple plans to showcase its original streaming content, with rumours pointing towards a revamped Apple Music platform which will offer both Music and Apple’s originally produced TV shows and Movies.

The acquisition of Netflix will not only give Apple a readymade platform to showcase its streaming content, the company will also gain Netflix’s 110 million plus subscribers in the process. Apple will also get access to the multiple original productions and licensing deals Netflix already has under its belt.

This will give Apple enough fodder to make a big splash in the streaming space, one it desperately needs, to make a meaningful impact in the industry which is already populated by large and growing players. Also, with Disney readying its own streaming service, Apple’s streaming business will face tough competition in the near future. A Netflix acquisition could definitely help spruce things up as far as Apple’s streaming plans are concerned.

However, we must not get ahead of ourselves since the news of Apple acquiring Netflix is currently based on an analyst note and has not been confirmed by either company. We have contacted Netflix for a comment on the same and will be updating the story once we hear from the streaming service.

Adamya Sharma
Adamya Sharma

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