Citi analysts claim that there is a 40 percent chance that Apple will acquire Netflix in 2018.
Analysts Jim Suva and Asiya Merchant peg their prediction on the extra cash that Apple could have on its hands following President Trump’s recent tax cut — thereby allowing it to repatriate around $220 billion in cash.
According to Suva and Merchant, Apple would need just one third of that cash to buy Netflix.
“The firm has too much cash – nearly $250 billion – growing at $50 billion a year,” they write in a note to clients. “This is a good problem to have. Historically, Apple has avoided repatriating cash to the US to avoid high taxation. As such, tax reform may allow Apple to put this cash to use. With over 90 percent of its cash sitting overseas, a one-time 10 percent repatriation tax would give Apple $220 billion for [mergers and acquisitions] or buybacks.”
Will they or won’t they?
This isn’t the first time they have proposed a similar deal. Last year, even prior to the Trump tax break, Suva suggested that Netflix could be a solid acquisition for Apple. He has also suggested that there was a chance of a Disney acquisition — although this was prior to Disney’s acquisition of Fox’s studio and TV assets.
Our take? Don’t count on it. On paper, the acquisition makes sense. Apple’s been pouring money into original content, and it’s gradually lost the digital distribution prestige it had with iTunes to streaming upstarts like Netflix.
But what exactly would Apple gain from Netflix? The business model of a popular monthly subscription service is something it built from the ground up for itself with Apple Music, and it’s already got a name with a whole lot of cool factor value (not to mention history in this area), which nullifies part of Netflix’s attraction.
Apple is also not struggling to recruit some high level talent to lead its original programming ambitions. As a result, it’s managing to put together some top-notch deals — including an Amazing Stories reboot from Steven Spielberg, a news-business comedy starring Jennifer Aniston and Reese Witherspoon, and a sci-fi drama series from the show runner of Outlander.
Ultimately, Apple would acquire a few more talented individuals, a whole lot of data about which shows users enjoy (a lot of which it can probably find from its iTunes sales history), a monthly subscriber base, and back catalogs of shows like The Crown and Stranger Things.
Those would all be nice to have, but possibly not at anywhere from $75-100 billion.