Apple Internet software/services chief Eddy Cue has floated the idea of buying content powerhouse Time Warner, according to reports. But Netflix and a range of other content moves are possibly on Apple’s radar as well.
The Financial Times reported that Cue has been in preliminary talks with Time Warner corporate strategy chief Olaf Olafsson - no meetings with top brass Tim Cook or Jeff Bewkes yet though. Also on the table according to FT are "other commercial relationships between the two companies, such as the potential inclusion of Time Warner's cable channels in a future Apple video streaming service."
“Perhaps the biggest takeaway here isn't that Apple is willing to seriously consider a Time Warner bid - that's far from clear, and buying an old media giant like Time Warner would raise questions about both culture/fit and conflicts with pay-TV providers and other Time Warner partners whom Apple could end up competing with,” said Seeking Alpha columnist Eric Jhonsa. “Rather, the big takeaway is arguably that Apple might now be willing to buy a company of that size [Time Warner currently has a $58 billion market cap].”
He added that Cook has signalled Apple is now open to bigger acquisitions, and should the company want to make a large overseas purchase, it has over $200 billion in offshore cash it can direct towards that end.
“This is the first real signs of Apple’s aspirations in video and it underlines the company’s intent to make a big splash in this area,” Paolo Pescatore, director, Multiplay and Media at CCS Insight, in an email. “It has the cash and it would therefore make sense to buy an established player, however there are other options on the table as well including Netflix, who we believe is a takeover target. Alternatively, Apple could invest in acquiring key premium content rights, but this would take a significant amount of time.”
FT also said that Time Warner might not be Apple’s only acquisition target. It said that "several bankers" see Netflix as a viable takeover interest. Jhonsa pointed out that acquiring Netflix would mean not only convincing a very ambitious Reed Hastings to sell a well-performing company with a skyrocketing stock price; but it would mean buying a company whose strategy has involved getting its content on as many platforms and devices as possible. That’s completely against Apple’s grain as a vertically integrated company built on a walled garden ‘i-model.’
There’s another way to boost its video bona fides besides acquisition: Apple’s cash flow would also allow it to easily purchase the rights to major sporting events or other hot content areas as well, Pescatore noted.
“Given its ability to distribute content to the huge installed base of affluent Apple device owners, this could be a new direction for the company, putting it into competition with other businesses such as Amazon, Sky and even some of the mobile network operators such as Verizon, which has recently purchased rights to the National Football League,” he said.
Amazon's recent move to offer a standalone monthly service underlines its commitment to video, he added.
We predict its next step will be to launch the service outside the US,” Pescatore said. “Taking this into account, Netflix faces increased competition from its rival, which is building a strong set of capabilities in hardware and services. All eyes are now on Apple and what it will do rather than when.”
Speaking of Amazon, Apple also reportedly wants to turn the Apple TV set-top into an Amazon Echo rival. Sources said that Apple wants to port Siri to be a home voice assistant/speaker for Apple TV, which will be getting a microphone and speaker. "They want Apple TV to be just the hub of everything," a source told Venturebeat.
“There's a logic to this approach: For a moderate premium - the 4th-gen Apple TV starts at $149, while Amazon's recently-launched Echo Dot goes for $90 - Apple could give consumers a device that delivers media streaming/playback and games in addition to the voice assistant and home automation services that are the Echo's calling card,” Jhonsa said. “But there's also a shortcoming: the Echo is often deployed in places where a TV set doesn't exist (for example, kitchens), and thus where a lot of Apple TV's features would be superfluous.”
Parks Associates recently found that Amazon has moved into a virtual tie with Google at 22% of sales for streaming media players (Roku claims the top spot). Apple TV comes in at fourth place with 20% market share.