A key Apple Inc. executive reportedly proposed making an offer for Time Warner, which owns Warner Bros., CNN and HBO. Today’s report is a refresh of a rumor we heard in January when the iPhone maker was also said to be eying the media giant. However, investment bankers think a streaming platform like Netflix would be a better fit because it wouldn’t keep the iPhone maker locked into offering only content produced by Time Warner-owned companies.
Apple, Time Warner said to have talked
The Financial Times reports that Eddy Cue, who heads up iTunes, Apple Music, and iCloud, among other Apple businesses, suggested that the company should bid for Time Warner toward the end of last year at a meeting. The media outlet’s sources reportedly said the meeting was between Apple executives and Time Warner’s corporate strategy chief, Olaf Olafsson. The meeting wasn’t specifically about a merger between the two massive firms. Instead, it was focused on other business relationships between them, like the possibility of Apple including Time Warner’s cable TV networks in its rumored streaming TV service.
The newspaper’s sources said the talks didn’t go beyond the preliminary stage and that neither Apple CEO Tim Cook, nor Time Warner Chief Executive Jeff Bewkes were brought into the discussions.
What such a report suggests about Apple
Time Warner has a massive market capitalization of nearly $60 billion, which still is tiny compared to Apple’s market cap. However, its size does suggest just how serious the iPhone maker may be about acquiring video content. Further, it demonstrates that the company is actively seeking new revenue streams as the iPhone’s growth slows and its cash hoard continues to grow, now reaching $216 billion.
Although the rumored streaming TV service has yet to surface, Apple has been producing content, notes the Financial Times. Recently the company commissioned a video series showcasing the app economy and also a series produced by and starting hip hop star Dr. Dre, whose company Beats Electronics it acquired about two years ago. The series is being produced for the Apple Music service.
Apple to ramp content spending
Despite its early efforts in producing content, the company is not spending nearly as much as Netflix, Amazon and other streaming video companies are spending on original content. That could change in the near future, however, as the Financial Times reports that the company plans to eventually spend “several hundred million dollars a year” on original content. The newspaper’s sources also reportedly said that the iPhone maker hasn’t ruled out acquiring a media company, which of course means the report about the interest in Time Warner makes sense.
As the FT points out, Time Warner and Walt Disney are the only top media companies that don’t have dual-class share structures that give family shareholders almost total control over them. Such structures would make it difficult for a company to make a successful bid for them.
Would Apple consider Netflix?
The newspaper reports that it’s unclear whether Apple will again express interest in Time Warner, although it adds that bankers who have worked with the iPhone maker said that it has been considering several possible media targets “for several months.” Also a number of bankers said that the company is more likely to make a serious offer for a company like Netflix rather than a pure content play because acquiring a pure content player would make it difficult for content by other producers to play on Apple’s rumored streaming platform.
This isn’t the first time Apple’s name has been linked with Netflix in terms of an acquisition. The rumors about a tie-up between the two have stretched back years, with the most recent recurrence coming in April when Cook said that they might “definitely buy something larger” than they had acquired in the past if there was a deal that made strategic sense. The company certainly has enough cash to get a huge deal done and most recently invested $1 billion into Chinese ride-hailing service Didi Chuxing, which of course gave the car rumors even more juice.