The unveiling of Disney+ and Apple TV+ certainly hasn’t made life easier for Netflix. The new streaming services come with single-digit dollar monthly prices that make Netflix seem more like a luxury than a necessity.
Laura Martin, Needham analyst, argues that Netflix should consider an ad-supported platform at about half of the platform’s current price, but since Netflix has long insisted on not going down this path, Martin believes that the best course of action is for the company to put itself up for sale. She realizes that there are not too many companies that can afford Netflix. The company is worth nearly $140 billion, and if you add a 30% premium that might be needed to close, that drives the price up to over $180 billion.
There are only 35 companies with market capitalization in excess of $180 billion and although some of them are technology and entertainment companies – including Apple and Disney, many are not ideal as potential buyers. Let’s look at Comcast, Apple, and AT&T, three of the giants that have something to gain from taking over Netflix.
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The analyst specifically mentions Comcast as a logical buyer one that is likely to bite the bullet for not buying Netflix when the company was cheaper. There was speculation about a Comcast buyout five years ago when Netflix had a market capitalization of less than $30 billion.
Laura Martin believes that a purchase of Netflix by Comcast would be badly perceived by the market now, as Comcast did not take advantage of a lower price years ago, but Comcast needs Netflix now more than five years ago.
Xfinity is expanding its broadband platform but has 612,000 fewer cable TV subscribers than last year. The revolution of switching from TV to streaming is real and the introduction of Peacock – its long-overdue streaming service – next year might be a little too late. Buying Netflix with its market leadership would be a powerful combination.
One year after the Sky takeover, the company now needs a new win to offset the organic losses in value year-on-year. Martin believes Netflix could earn $6 per month per customer from advertising and the company could use this to lower its monthly prices. Netflix would never go down this road, but Comcast would not bat an eyelid.
Apple is now the world’s most valuable company in terms of market capitalization, and it is sitting on a mountain of money. Apple TV+ isn’t making the same waves as Disney+, and that leads us to Netflix. Apple is all about premium services and that’s what Netflix currently offers.
Netflix would make a worthy addition to Apple’s on-demand premium digital rental and sales. Apple TV+ subscribers get multiple options for new or recent movies, offered as one-time digital rentals or online purchases. Apple would love to get its hands on Netflix’s 158 million+ premium accounts and would have no problem drawing these customers deeper into the Apple ecosystem.
A telecom giant buying Netflix would not be a surprise. Just like Comcast, AT&T is losing Pay TV customers at an alarming rate. AT&T has already closed a major content deal with Time Warner, but now it needs a greater platform reach.
Netflix is fulfilling many of AT&T’s dreams here, in part because it could also enhance AT&T’s thriving wireless offerings by bundling Netflix access with smartphone tariffs, as some of its rivals are doing with Disney+. AT&T may be the least likely buyer of the three, especially since it is currently having problems on other fronts. But AT&T could be desperate enough to generate new growth.
Whilst Netflix is unlikely to be sold in the next year or so if the company continues to run into problems one of its competitors may see an opportunity to purchase a thriving subscriber base at a hefty discount within the next 2-3 years.
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First published in Vestors Capital, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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