Every time there is mention of Netflix, Inc. (NASDAQ:NFLX) as one of the companies that are ripe for acquisition, Apple Inc. (NASDAQ:AAPL) is mentioned as one of the potential buyers.
One of the reasons Apple is considered as one of the ideal buyers for Netflix is the fact that the iPhone maker has adequate resources considering the equally impressive Market Capitalization of Netflix. Such an acquisition would also align with Apple’s increasing focus towards offering more in entertainment. The firm has already covered audio entertainment significantly and is diverting its attention towards video and TV.
Netflix revenue would also provide a substantial boost to Apple. In fact, an analyst known as Toni Sacconaghi of Sanford Bernstein claims that Netflix would add $8 billion in revenue to Apple. The analyst also claims that it would be a good move towards helping Apple gain more traction in a subscription-based business model. It would also help to bring down costs due to brand advantages, operational prowess, and marketing reach. It would also boost the stocks and lead to more growth.
“We believe AAPL could and should look to build a subscription offering of features and services that could be bundled with its hardware offerings, analogous to what Amazon does with Amazon Prime. Netflix (at a discounted price for only iPhone or iPad users who buy Apple hardware as a subscription) could be a key element of an attractive services bundle,” stated Sacconaghi.
These factors make a compelling argument as to why Apple should acquire Netflix but there are some equally compelling arguments suggesting that such an acquisition would be disastrous for Apple. The acquisition would be too expensive in the first place, and Apple does not usually acquire large firms, especially those that are already established. It also goes against Apple’s philosophy of creating great products rather than acquiring those already made by others. Apple is also competitive and aims to make its own services.
Despite the attractive nature of such an acquisition, Apple will most likely strike licensing deals with content providers rather than acquiring Netflix. The company already has significant influence and it would stick with its competitive nature.
Apple stock closed the latest trading session at $113.05 while Netflix stock closed the session at $106.28.