Analyst Brian Marshall of Gleacher & Co believes that Apple should buy Netflix. On Wednesday, he published an advisory note to clients. According to Marshall’s estimates, Apple’s movie and TV rental numbers are currently at about a tenth of what Netflix rents, compared on a quarterly basis. The DVD rental and online streaming giant handles approximately 5 million rentals a day, divided evenly between physical discs and streaming on demand, while Apple rents 475,000 movies and TV shows a day. In revenue, Netflix makes $550 million in rentals per quarter, while Apple makes $60 million in rentals, and another $50 million in purchases.
Marshall noted that if Apple can grow its rental business similarly to Netflix’s historical performance, it could be looking at a rental revenue of over $1 billion in five years. “As Apple’s rentals scale up going forward, they will generate significant profit. They will start to become more of a profit center for the company,” said Marshall.
Instead of competing with Netflix, Apple should acquire the company according to Marshall. He estimates that Netflix could be had for a mere $12 billion, easily handled by a company like Apple, which has in excess of $50 billion cash on hand.
It’s difficult to see exactly what Apple would get by buying Netflix. Apple doesn’t like to run other business, it usually absorbs them, and unless Apple is making a move into the subscription model, I don’t see them absorbing Netflix and all their subscribers into some kind of iTunes Movie and TV subscription package. Netflix right now is a prime offering on their Apple TV and a selling feature. Would Apple really buy Netflix, keep the Netflix brand, and continue running it, DVD rentals and all? It’s doubtful. If Apple grows its own business to a $1 billion a year profit engine, as Marshall says, I think they’ll be happy to just do that and let Netflix do its own thing.
What do you think? Does Apple stand to gain anything by buying Netflix?