Netflix has welcomed back The Entertainment Strategy Guy to launch the second part of a two-part series; they search for mergers and acquisitions for Netflix. At this point, they have 9 targets for Netflix to acquire or merge with many obvious candidates with a few surprises.
Netflix merger and acquisitions have been put into four buckets are Film, TV, Wildcards, and the last one is “Being Acquired”.
About Film Studios
It has been heard that Netflix wants to own a movie studio. It assumes that at first, buying an entire library of historical staff is mostly cheaper than building it from scratch. After Disney bought Fox, they just got the future films and the Predator, Avatar, and Aliens franchises.
It is assuming that the main reason behind Netflix would not agree with is Netflix could observe a thing or two from the old studios. Still, Netflix revealed that they could also make a lot of incredible films like Bird Box, Extraction, and Enola Holmes, but those might not be the blockbusters at the box office.
Among the six majors, Sony is the last one that has not its own streaming platform. It comes to know that they have a deep library and the films just have been licensed by Netflix for the future.
As Sony does not have the streamer there IP is maybe the weakest among the major studios. It is also known that their best IP is rented from Disney. Netflix had also bought Sony, Disney just to buy the library windows but Sony did not sell it to Netflix.
After Sony Pictures has been owned by the Sony Corporation is a little bit tougher to speculate and does not have clean market capitalization for the comparison. The TV business has been included with the range of $5-10 billion.
In the open market, Lionsgate is one of the highest-grossing studios. Technically it is considered a mini-major so it does not come under the big six in the 2000s. For some films like The Hunger Games, Twilight which is the best n domestic box office, If Lionsgate has been owned then it indicates including some great franchise like The Hunger Games, Twilight, Saw, and John Wick series.
Starz which is owned by Lionsgate is very prominent as a streamer. If Lionsgate has been bought by Netflix it also would be with Starz. Lionsgate has some franchises included with twenty years of movies which is smaller than some studios.
As it is traded publicly we can look at its stock price directly. Lionsgate recently has a market capitalization of $3.2 billion, the range can be put from $3-5 billion.
It is better to say it a zombie studio. Now, this studio is not that major one with a tiny share in the annual box office. In this studio, the biggest success is the James Bond franchise but they also produce the movies with EON Productions. They also have some historical legacy with some library collections.
It comes that MGM is not able to own the number of catalogs as they think due to the selling of their big portions in past. This studio has sold the two jewels of the 1930s, one is The Wizard of Oz and the second is Gone with the Wind to Ted Turner in 1985.
As MGM is held privately that makes the speculation a little difficult. It heard that Apple is looking to buy MGM and the value was $5 billion. It would be high depending on the assets that MGM owns.
Discovery has been purchased by Netflix for years. Here also the reason is cheaper content but focusing on mindless, reality fare instead of scripted originals that becomes a huge chunk on TV viewing and streaming. Discovery has continuously pushed their wares on the Discovery+ that came in January.
It is assuming that the deal cannot happen. There was a pre-Warner Media Discovery which was viable and currently they are too big for a merger with Netflix only Netflix will overpay hugely.
Wildcard Acquisitions & Mergers
It is assuming that if Netflix takes a decision for past content then they bulk up their entire distribution or diversify to the other category of streaming content.
If Netflix targets TV then one of the most glaring weaknesses will be live events mainly sports. It is not like Netflix cannot understand live sports, they regularly ran sports documentaries such as The Last Dance or Formula One: The Drive to Survive. Netflix has to need to increase the programming ability in house and it will be only solved if they buy streamer like DAZN.
There is no doubt that sports are a double-edged sword. After growing the fat off ESPN’s customer salary in the 2000s they provide a lot of revenue back to the sports league just to get the rights thus it is an important wheel for Netflix. It is also informed that DAZN losing money $1-1.5 billion each year on their revenue of $300 million.
This platform has sought outside funding twice included with $1 billion at the last year but did not stop any deal. It has been heard that $2-$20 billion has depended on their financials and also the vision of growth.
Fast to Buy
The battle of distribution is as terrible as the streaming wars. The main tension for Netflix might be that the tech giants such as Apple and Amazon put increasingly on Netflix in the poor locations of their OS to give the main priority to their own services. If Netflix has bought by Roku which is the giant smart device that can help to play on the playing field.
Downside and Value
It will be the most costly option as Roku has an incredible year for streaming. The market capitalization is about $40 billion and a few months ago it was $60 billion.
It has come out that Spotify is facing a struggle to build money and Netflix also struggles to make money so if both of them have been combined then anyone has the buzziest and also has the subscription under the age of 40.
It is still unclear if the combined components are really do have any synergy. There are also some crazy combinations that don’t really make sense in real life but feel good on paper.
It is true that Roku was the priciest option on the board and Spotify has it beat at about $44 billion. It indicates that Netflix could easily swallow it, but the main fact is it would dilute their shareholders significantly or would be a merger and not an acquisition.
Who will obtain Netflix?
Netflix is as huge by market capitalization and globally it is one of the top 50 companies that has never stop rumors instead of getting purchased. The main fact is Netflix has been too successful. it is almost too large to buy.
But there are two companies that may swing it.
Apple wants to enter into the streaming game and it is not clear how many people are checking out Apple TV plus. If they buy Netflix it can solve that problem which is the biggest device maker by revenue immediately gets the world’s biggest streamer by subscribers. Apple is sitting on hundreds of billions in cash to afford it.
Though the federal government might hate it a former President is collecting a big amount from Netflix, but that could not stop President Biden from saying Apple that it’s too large. If it is merged through the US Department of Justice then it would basically undercut any claims they are worried about in tech.
It has also seen that Mark Zuckerberg has tried to get into streaming video many times with Facebook Watch being the most well-known example but each effort has failed to gain that just like the Spotify merger, imagine what would be done with the targeted ads if it could connect with everyone’s Facebook profile with their Netflix viewing history.
It would say that it could harm the Netflix brand severely. It is true that you can trust Netflix with your viewing history, but would you trust Facebook Plus, Facebook could integrate with their past acquisitions.