Should Apple Buy Netflix?


I was on Leo Laporte’s TWIT show yesterday and ended up going on a bit of a rant about Apple and “Planet of the Apps.” My view on “content” efforts like this is pretty simple. It is distracting, non-core to Apple and basically avoids the bigger challenges: how to add data and Internet DNA into a company that has managed to struggle with services. The App Store needs more smarts and better search, and it needs to take a contemporary, data-centric approach to surfacing apps. “Planet of the Apps” is just an old media-like thinking applied to “apps.” I might be the only one who feels that way, but the reality is that these kinds of efforts are really not good for Apple at a time when it is competing with Google, Amazon and Facebook.

Apple—if it really wants to get into content and wants to make a strong statement to the Hollywood establishment that has stymied its television efforts so far—should make a big, bold bet. It should use its massive stock market capitalization and cash hoard to buy Netflix. Apple is currently valued at $584 billion and it can afford Netflix, which is valued at around $42 billion. This is a way better use of its financial resources than spending $58 billion on stock buybacks over the next two years. Apple already has spent $117 billion on stock buybacks since 2012 and given out $46 billion in dividends. That is more than enough to buy Tesla.

What does Apple get with Netflix? It gets a large library, and a company that has presence on all major platforms and has partnered with most (if not all) major entertainment hardware makers and is well represented in the Android ecosystem. It has established relationships with top broadband providers and has a big infrastructure to support its nearly 83 million subscribers. It already is an established brand—but most importantly, it brings some much-needed Internet DNA into Apple. Netflix’s engineering and cloud teams are amongst the best in the business and have contributed to the modern cloud movement. In more ways than one, they could help add the vital Internet and cloud DNA to Apple, which seems to be fairly serious about its services business.

A letter from Om

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