As iPad rumors have cooled in the wake of the release of a new device and a wait until the release of rumored devices possibly still to come, another oldie but goodie has popped back up over the last couple of days. There have been Apple and Disney merger, purchase, and partnership rumors going back several years, but they have really picked up some momentum this week.. We all know Apple has a massive $200 bilion plus pile of cash (although most of it is currently trapped overseas), and that they are starting to look for and produce their own media content, including video. Both brands are also iconic and synonymous with quality and attainable luxury, so the companies do align in certain areas, which is probably why these rumors make sense in a lot of ways.
So what would be in it for Apple?
Mountains of Very High Quality and Prestigious Video Content
Everyone knows that Apple wants to get into video, but it takes time, patience, and a LOT of investment to make this happen. So many in the media have taken shots at Apple for starting out with Planet of the Apps, but conveniently forget that Netflix started with Lillehammer and Amazon with throwaways like Alpha House. Starting with a modest and manageable budget to figure out systems and costs are a smart way to go. Shows like House of Cards and The Man in the High Castle, and the chops and experience to make them and promote them, don’t just appear out of thin air. The process has to start somewhere.
However, Apple buying Disney could set the online video industry on its ear. As successful as Netflix and Amazon have been, they are NOT Disney. The trick for Apple would be not killing the goose that laid the golden egg by suddenly walling off all of Disney’s content. That would be a huge mistake, However, if they can strike the right balance of keeping Disney properties available everywhere, and incentivizing their many fans to sign up for Apple Music and buy and Apple TV to gain access to great exclusives and the massive back catalogue, then they can reap a brand new windfall of profits from both their own and other sales channels. On that note…..
Evergreen Content, and the Profit That Comes With It
“Evergreen” products are what every business longs for, but few tech businesses can manage to produce. By their nature, their business models are based on getting rid of the old and constantly re-inventing and coming up with new ideas. Disney, however, has a wealth of evergreen content in their back catalogue that never has to be touched or updated to keep on selling. They have become the masters of artificial demand, by doing things like only releasing back catalogue movies on DVD, BlueRay, or digitally for short periods before taking them back off the market. They have millions of adoring fans who keep coming back for more. Think of what Apple could do to bolster their products and services by making some of this content Apple-platform exclusive. Not all, if they are smart, but some. I can guarantee you that if Apple pulled Disney content from other online streaming services and offered unlimited access to select content via an Apple Music subscription, it would instantly drive subscription sales up.
State of the Art Production With Tons of Real-World Experience
This can’t be understated. Apple would be buying a company that makes some of the most popular movies in the world, has access to directors, producers, etc that it would take Apple years to get to on their own, and already runs multiple television and radio networks. Once through the inevitable transition period, all of the growing pains that would come with building up in-house movie and TV capabilities on their own would be gone.
This is another one of those things that is very hard to buy. In the case of buying Disney, the very hard comes in terms of what I’m sure would be an insane price tag. But if Apple were to make this happen, then they would have instant credibility in media sales and production. They would need to prove that they can handle the transition properly, and manage Disney’s precious assets correctly. But barring a catastrophe, they would have complete credibility in the movie, TV, and radio industries, and a leg up on all other tech companies who are getting into, or who are already established in media.
Here is an other area where, if Apple played their cards right, they could really push one of their platforms forward. Since its release, the current-gen Apple TV has struggled to carve out much of a name for itself. I have one, and it is a really good, solid device. Unfortunately, the App Store for the TV hasn’t taken off like Apple expected. However, bolstered by a game catalogue that would include a plethora of Star Wars options, Apple could make a second push to become a secondary/lightweight video gaming platform.
A Potential to Finally Bring Their Money Home
I think all of the tech media agrees on this being the biggest advantage for Apple in doing such a large deal. The fact that the majority of their cash stockpiles are overseas means that they can’t use that money for deals in the US without paying an absolutely insane amount in corporate taxes. Enter current President of the United States Donald Trump, and his much more corporate-friendly policies. Apple and Tim Cook have been very careful to keep their disagreements on Trump’s social and foreign policies civil and limited, and to stay engaged with him and his administration on tech and corporate policy. I don’t think this an accident. They must see his Presidency as an opportunity. Whether it is Disney, another large acquisition or merger, or many smaller ones, look for Apple to make moves to bring their money home over the next four years.
What’s Not So Good for Apple
Disney’s Resorts, Cruise Lines, and MANY other travel and real estate holdings that don’t fit Apple
These are obviously VERY profitable and popular businesses for Disney, but does Apple have any interest in running them? They are likely very profitable, but they are FAR outside Apple’s core businesses. This would be a very big question if Apple purchased Disney. Would they spin these off into a separate company, or just keep things as they are and reap the profits, but also have the responsibility to keep them profitable and up to date?
Apple already has a massive retail presence at a time when a lot of brick and mortar stores are struggling. Would Apple want to carry all of this additional retail space over into this new deal, or would they want to sell them off? Or, would they use them as a way to grow their reach beyond full Apple Stores? Maybe this one could go either way, but it is still a big question mark as to how they would handle the addition of such a large retail division.
The Massive Price Tag
There is no mistaking it. This would be the whale. The big fish. This would wipe out most, if not all, of Apple’s cash reserves. As such, if this move didn’t work out as planned, it would really set Apple back. They have used their large cash reserves to guarantee massive parts orders for the assembly of their devices overseas, and and keep a lot of the competition at a disadvantage. They have been able to pay up front, and offer vendors the guarantee of payment for their products and services with cash on hand. Apple wouldn’t have that same advantage anymore after a purchase this large.
I’m not even going to try to prognosticate what would be positive or negative for Disney. I frankly don’t know the company well enough to have a good frame of reference. As such, if there are any Disney fans reading this, I would love to get your takes on the positives and negatives for them. However, as far as Apple is concerned, I’ll believe it when I see it. I think there are more good fits and advantages than obvious disadvantages. However, a couple of the disadvantages, such as a potential loss of purchasing leverage, and having to take on a lot of Disney’s businesses that don’t really fit, are significant. No matter the advantages and disadvantages, Apple has NEVER shown any real interest in making massive deals like this. They have always preferred to buy up smaller companies that compliment what they are already doing, so a move like this would be completely out of character for them.
Still, it is interesting to think about all the possibilities of two companies like Apple and Disney that do compliment each other in a lot of ways coming together. I’m very interested to hear what all of our readers think about a potential Apple-Disney partnership. Would it be an amazing marriage that boosts the fortunes of all involved? Would it hurt Apple in the long run? Would it fundamentally change everything about Disney? There is just a LOT to unpack here. Feel free to tell me what you think about it in the Comments section here, on Flipboard, our Facebook page, or on Twitter @iPadInsightBlog.