Here’s Why Apple Will Likely Never Buy Netflix

Business and financial analysts are constantly looking into the big companies to determine whether there are any links and if there is the potential for one to buy out the other. Two of the companies under close scrutiny are Apple and Netflix. For several years, analysts have been making predictions regarding Apple buying out Netflix. Analysts have been suggesting for some time that spending billions to buy our Netflix is potentially a good move for Apple. It will allow them to get into the streaming business at the top-level instead of developing an entirely no concept. Although there are many that think this is a good step for the tech giants to take, it does not mean that this is a deal that will ever happen.

Two experts interested in this possibility are Asiya Merchant and Jim Suva, two Citi analysts. United States tax laws have changed with regards to acquiring Netflix and this is a situation that Merchant and Suva believe Apple can use as leverage. The previous year, speculation was ignited when CNBC’s Anita Balakrishnan argued that there had been an increase in spending on entertainment programs. In her opinion, Apple would see growth in their services revenue if they went ahead with acquiring Netflix. However, she warns that just because people can do something, it does not necessarily mean that it is the right course of action to take.

One of the most recent analysts to get involved in the debate over whether Apple should buy out Netflix is Samik Chatterjee of JPMorgan Chase. He believes that Apple should seriously consider buying Netflix. He also thinks they should consider buying either Sonos or Activision Blizzard. Of these three options, it is Chatterjee’s opinion that Netflix is the best fit for Apple strategically. Chatterjee argues that there is currently rapid growth in watching videos via mobile phones and other portable devices. As Apple is a leading brand in the smartphones industry, it makes sense that they can develop stronger services growth by having involvement in both the smartphone and streaming industries.

Sonos is potentially another good option for Apple to acquire as both companies target the same demographic, which is high-income households that are willing to spend more on premium products. Sonos also sells smart technology, although they predominantly manufacture smart-home speakers and sound systems. Activision Blizzard is one of the leaders in the video game publishing industry. Just some of their franchises include Call of Duty, Candy Crush, and World of Warcraft. This means they have a direct link with Apple as people access these games on platforms including smartphones, consoles, and computers. As a result, Apple could enter the gaming industry, which is one of the fastest growing industries in the technology sector. In turn, this would lead to a steady income stream for Apple.

Now is potentially the right time for Apple to consider making the leap and acquiring a large brand. Due to the recent market correction, there are now many established and successful companies that are selling out at rock-bottom prices. This is ideal for Apple, both financially and strategically. So, why is there the potential for Apple to want to invest in a services company, such as Netflix? One of the biggest reasons for this is that they have seen dramatically decreasing sales in their iPhones, which are their flagship products. The company is keen to develop the services side of their business to counter this problem they are encountering.

Apple has become reliant on sales of their iPhones, and this was evident in a warning that they issued in advance of their first-quarter earnings report. The warning says they are expecting a drop in iPhone sales of around 5% and the majority of this decline relates to the slowing growth in China. Tim Cook, the Chief Executive Officer of the tech giant, has openly talked about Apple’s investments and has said that the company generally invests in between 10 and 20 businesses annually. He has also said that they consider investments of all sizes as it is not the size of the company that is important to Apple. They place greater importance on the strategic value that the company in which they are investing will add to Apple. At this time, it seems that Netflix does not offer Apple the strategic value that it wants and acquisition seems unlikely in the near future.


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