Late last week, chatter about an Apple acquisition of Disney picked up after RBC issued a note listing the pros and cons of a deal getting done between the two companies.
In the note, the analyst (Amit Daryanani) speculated that were Apple allowed to repatriate the money it holds overseas, the odds of a Disney acquisition would go up.
"There are plenty of factors to consider, but such a deal would create a tech/media juggernaut like no other and instantly scale [Apple's] services, content and media portfolio, which would make the case for a higher valuation," Daryanani wrote in his note.
Consider the following stats (from September 2016) from global media agency wearesocial.com:
- Of the 4.116 billion people that live in the Asia-Pacific region, 1.825 billion are active internet users for a penetration rate of about 44%.
- Of the 4.2 billion or so people that live in Asia-Pac, 3.86 billion (94%) have a mobile connection to the internet.
- Asia-Pac share of the total global population is 55% while its share of the global internet users is 50% and 49% of the global mobile connections are in the APAC region.
In another study, communications technology company Ericsson said that nearly two-thirds of the world's population now has a mobile phone and more than half the handsets in use around the world (55%) are smartphones.
Finally, take a look at the following metrics dealing with web traffic in Asia Pacific for September 2016:
- 39% of web traffic was received on laptops and desktops for year-on-year growth of -17%.
- 58% of data was received on mobile phones for YoY growth of 18%
- 3.2% of web data was received on tablets and other devices
The point of all the above statistics (although centered on one region) is that most internet users are now receiving their data on their mobile devices versus any other source out there. Most importantly, Asia is where the growth is, whether one looks at growth in smartphone usage, growth in data downloads, growth in mode of data downloaded by users and just about any metric one uses to compare growth rates in internet usage and the modality of that usage.
I am in total agreement with the analyst as far as Apple needing to make an acquisition in the content space. However, I disagree on Apple taking out Disney. I think the deal that needs to be made is for Netflix and not Disney.
By making a deal for Netflix, Apple would make its ecosystem the biggest and the best there is. It will also eliminate the restriction of Disney-only content it will face were it to buy out Disney, not to mention the massive disparity in the price tag for a Disney acquisition versus a Netflix take-over.
I have long been a proponent of a Netflix acquisition by Apple and I continue to believe that a deal between the two companies would serve everyone's best interests - none more than shareholders of both companies.
Apple can combine its focus on the best-of-breed in its current line of hardware products (iPhones, iPads, Macs, Air, iPods, Airpods, et al) with best-of-breed in services/ecosystem were they to make a big content acquisition.
Does the deal happen?
I am not sure whether current Apple management is motivated to get a deal of this sort done, as they seem to be content with a plodders approach to building their own content despite being way behind in the "build it and they will come" game.
Never say never though.
Just a quick reminder, Netflix will be announcing its March quarter results tonight after the closing bell.
(Long aapl, nflx, long and short options on both)