Should Apple Buy Netflix?

Pssst… Did you hear? Apple may be buying Netflix!

Oh, you heard that one? Six months ago? A year ago? Yeah, that rumor has been popping up regularly since at least 2014 – and it’s back again.

I’ve always had a love-hate relationship with Netflix as a streaming service. Their original shows, like “House of Cards” and “Bloodline,” are amazing. And it’s great when you just need a kids show to occupy children while you fix dinner. But, as everybody knows, Netflix’s streaming selection is too thin to make it a Movie Night destination. They almost certainly don’t have the flick you really want to see tonight.

That could change if this rumored deal actually happens. Combining the iTunes and Netflix movie collections would make Apple a leader in streaming TV with a huge “share of living room.” Subscribers could go to a single platform to either stream whatever catches their eye from the Netflix offerings, or pay a premium to see the exact movie of their choice from the iTunes library.

An-Apple owned Netflix could also start renting or selling high demand digital content to its 81.5 million subscribers via the iTunes platform.

From an investor perspective, Apple and Netflix are very different companies. Apple, the most valuable company in the world at a market capitalization of $535 billion, is a mature tech stock that actually pays a regular cash dividend. Netflix ($43 billion market cap) is a pure “growth” stock that pays no dividends, instead pouring all its resources into innovation and market share growth. Investors who own Netflix are riding the share price trend in hopes of cashing out one day with a large profit and a great story about how they bought Netflix at $10 a share.

Apple, which has $200 billion in the bank, could make that dream come true by buying Netflix with the change it finds under the corporate sofa cushions. But will it? Industry observers seem split. Some believe a big content deal like this could help bring Apple out of its (relative) doldrums and create a huge new revenue stream for the company. Others say Netflix still faces too many hurdles and competitors to be an attractive acquisition. Still others warn that Apple has a poor record dealing in content and should stick to hardware and software.

See why the Netflix/Apple rumor keeps coming around? It’s just a heck of a lot of fun for us financial and media geeks to kick around! Look for it to resurface whenever things get slow and Wall Street gets bored!

 

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