Business Insider recently started posting about an interesting topic on a news from Wall Street on the potentially huge deal. This News would be about Apple and the possibility of them buying Disney. The thing is how realistic this news is? There’s a little doubt that Apple could afford to buy Disney outright but will they and for what reason?
Apple is now worth over $215 billion. There are a number of things that company could do with this pile of cash. Will they reinvest this in future products? They are continually releasing new products so an increase in R&D could be expected.
This was increased from $8 billion in 2015 fiscal year to little over $10 billion in 2016. This profit only accounted for 5% of net sales so there is heavy potential for increased R&D spending as Apple could consider diversifying or increasing the improvements in the latest iteration of iPhone, Mac, and other Apple products.
This won’t really put any sort of dent in that cash pile, it wouldn’t even negate the sheer amount of cash the company brings in each year. This is where Disney comes in. Content and how to use that content is a huge thing. Apple would hold a huge advantage should they gain the library of Disney.
Apple with Disney: Content is King
It’s no secret that exclusive content is a giant advantage in any competition with another media company. The possibility of Apple holding the exclusive rights to the streaming of Disney films and TV shows. The licensing of any Disney mobile games being limited to iOS only. This alone would increase the perceived value of the iPhone, iPad and Apple TV. Of course, with the majority of the mobile and home computer market consisting of Android and PC respectively, it would severely undermine Disney’s bottom line. It would be counter-intuitive and likely never happen. However, timed exclusivity could be an option.
Looking at video games gives a perfect example of how exclusive content can sell devices. The Nintendo Switch has sold over 1.5 million almost exclusively on the back of a single game and brand recognition. Other consoles like Sony’s PlayStation 4, have a wide number of exclusives (Horizon Zero Dawn, The Last of Us, Uncharted) that act as system sellers. Of course, games aren’t system sellers for phones in the way as for home consoles, but they are certainly making an impact due to the growing size of the mobile gaming market.
Beyond games, there would be a great potential for Apple to use the success of Disney’s films. According to Box Office Mojo Disney found themselves with the top five grossing films of 2016. Imagine the possibilities of Apple TV, through iTunes, holding the rights to stream these films at the same time as the cinema release. While this is unlikely, the options directly following the cinematic release are there. It could be something as simple as earlier, if not exclusive digital access to Apple devices.
Of course, there are pre-existing deals in place. Marvel and Netflix have worked together in the creation of a large number of series’. Netmarble, who are planning an IPO, have a deal in place to release games featuring Marvel, Star Wars and other Disney characters on both iOS and Android systems. This doesn’t include the countless other companies that have licensed Disney properties for games and other media.
That Apple would want complete exclusivity, should they buy Disney, is far from likely. There is certainly a lot of money to be earned from opening content to a wider number of people. Cannibalizing the Disney brand to increase Apple’s valuations doesn’t seem like something the Cupertino giant would do.
Would the Deal be worth it?
Samantha Greenberg, the founder of Margate Capital, a hedge fund, supported this in an investor letter obtained by Business Insider.
“Apple has talked about the benefits Apple sees when it owns the exclusive content, and owning Disney would reduce Apple’s exposure to product cycles, expanding AAPL’s valuation” Greenberg stated. She then followed up with “It would also be an accretive use of Apple’s cash and even more so if Apple’s $200Bn of offshore cash can be repatriated favorably.”
There’s little doubt that the acquisition of Disney would add an incredible amount of value to Apple. What should be looked at is the value of the products and services that Apple offer. The possibility to remove any overlap and share resources will only increase the value and reduce costs. Maximizing synergy would be key here.
Of course, what should also be considered is the fact that Disney is currently finding incredible success in movies and the merchandise and collectibles that come along with them. The chances of selling on or spinning off less successful areas like ESPN and the ABC network, suffering from falling subscribers and viewer numbers, would only make Disney look like an even more appealing target for acquisition.
It’s something that’s been rumored for quite a while but as Apple’s cash pile grows ever larger. Finding a use for it that benefits the company long term will certainly appeal. Over previous years the company had considered acquiring Netflix and Time Warner. Tim Cook himself has previously noted that there is no size they wouldn’t do, based on the size. It would be based on the strategic value of it. Would Disney offer that strategic value? I could certainly see that being the case.