- With the entertainment industry suffering due to the corona outbreak, rumors are floating around that Apple might take over Disney in the coming times.
The latest rumors of Apple purchasing Walt Disney Co. aren’t new-they date back to the Pixar takeover of Disney in 2006. That made Pixar co-founder Steve Jobs the biggest shareholder and a board member of Disney. Of note, Jobs was the co-founder of a small computer company you may have heard of called Apple and was on his second duty tour as their CEO at the time.
After Disney’s acquisition of Pixar, the reasoning that it was just a matter of time until Apple returned the favor and purchased Disney. Such rumors have been circulating on and off for almost 15 years, and last fall they got a new infusion of energy. That’s when Bob Iger, former Disney CEO, noted in his memoir that Jobs had not died in 2011, after all, a Disney / Apple combination may have occurred.
“I think we would have merged our companies if Steve were still alive, or at least addressed this idea very seriously,” Iger wrote.
Fast-forward a few months and, due to the coronavirus outbreak, the Apple / Disney merger speculation seems to be riding high again despite the surge of confusion roaring through the markets. This time, it was proposed by Rosenblatt Securities Analyst Bernie McTernan, who wrote in a note that could now be a perfect opportunity for Apple to pick up Disney at a price bargain and create a win-win for both companies.
After all, Disney and several other businesses are taking a beat at the hands of the outbreak in the travel and entertainment vertical. Disney’s Asian parks were closed for most of the first three months of 2020, and as of yesterday (March 16), the company’s U.S. parks had followed them. So far this year, this has helped drive down Disney’s stock price by about 35 percent.
McTernan wrote in his note that this provides Apple with a perfect opportunity to update its Apple TV+ subscription service by buying Disney and its competing Disney+ subscription deal. Being a new entrant to the streaming wars, so far Apple TV+ has failed to have ample original content to compete. “Disney+ could solve the content issue for Apple because we believe that AppleTV+ is off to a fairly slow start,” McTernan wrote.
Disney+, by comparison, is not off to a late start. At the end of 2019, the company signed up to 26.5 million subscribers, totaling 28.6 million as of Feb. 3.
McTernan also explained in his study that the current uncertainty of the market may favor “mega-cap companies with significant cash reserves and whose equity has outperformed Disney.” He noted that Apple is in a particularly strong pole position for this type of acquisition, firstly because of Apple TV+’s relative underperformance to date, and also because the computer giant has about $107 billion in cash and securities on hand.
“The upside of Disney’s acquisition will be to protect its entertainment/streaming strategy and future synergies [and] extend the evolving Disney ecosystem to the iOS platform,” McTernan wrote, adding that Disney will gain access to more than one billion Apple devices where their entertainment will be closely integrated. A merger may also bring stability at Disney’s peak, where Iger abruptly departed from the CEO position that Bob Chapek now holds.
Nonetheless, this hypothesis is just that-speculation. McTernan admitted in his note as much as none of the companies gave the slightest hint that they even contemplated such a contract. There’s no guarantee either company will want a merger–particularly Disney, which would end the losing deal by selling it to Apple at a fire-sale price.
Although Disney’s stock price is down, the company remains one of the most popular companies in the world and no reputable source on Earth claims the company would be bankrupted by the current economic recession. But it seems unlikely Disney will consent to a fire-sale pricing deal. And note, the first feature-length film from Disney was “Snow White and the Seven Dwarves” from 1937–and if there is any lesson to be learned from that story, it’s to be wary of people offering apples.
Then again, if you asked people in December what the chances were that a global pandemic would cause Disney World and Disneyland to be closed indefinitely by March, most people would probably have said something in the neighborhood of 0 percent. Day by day the spectrum of what is probable or even feasible is changing. And as any Disney princess worth her tiara would tell you (probably in the song), you’re only a few unexpected occurrences away from having a different destiny altogether.
Although it’s just speculation, looking at the condition of the market, everything seems a possibility now. If Apple decides to pick up Disney, it will give Apple an edge in the entertainment industry with Disney being one of the biggest players in the industry. But given the market conditions we can only assume and predict now, let’s see what happens.