A Whole New World (of streaming): Disney to acquire Netflix?

We’re just over a month into 2017 and already rumours are circulating about a magical mega deal set to take place this year. Despite the lack of evidence to back-up a Disney acquisition of Netflix, there has been much discussion throughout the industry about whether such an acquisition can and will actually happen.

Worth $56 billion, Netflix is the world’s biggest subscription-streaming service, with more than 80 million paying customers. This elevated position in the content streaming industry means that its price tag would be somewhere in the region of an eye-watering $70 billion. The question is, given that Disney could engineer its own platform for a fraction of the price, why would it spend so much on Netflix?

In fact, Netflix would provide Disney with a robust platform and a brand everyone knows to screen its premium programming and sports content across the globe. There’s also the benefit of Disney having access to a wealth of data on viewer engagement and the prospect of the company adding top Netflix talent to its leadership team. Also, Disney chief executive Bob Iger has publicly expressed a desire for the company to adapt to keep up with the modern content distribution landscape and there are rumours he’s looking to complete a major digital acquisition before his contract expires in June 2018.

While acquiring Netflix would no doubt propel Disney into the big leagues when it comes to subscription streaming, some analysts can’t get past the price and doubt Disney will take the plunge. To put things into perspective Disney paid $7.4 billion for Pixar, $4 billion for Marvel Entertainment and $4 billion for Lucasfilm. Acquiring Netflix would demand a figure more than four times what it paid for these companies combined. Credit Suisse analyst Omar Sheikh commented in a report released on 10th January that such a deal would be tough for Disney to justify, in spite of the benefits it might bring. He said: “We believe Disney will most likely follow the more conservative, organic path and choose not to acquire Netflix.”

In spite of the rumours, Netflix is not actively looking for a buyer and there have been zero rumblings from its camp about a potential buyout. However, it is widely known that the company is spending huge amounts of money to develop new content, with 2017 spending predicted to reach $6 billion. This has put a huge strain on the business and its shares, causing growth to slow considerably. So, perhaps a Disney acquisition is just the ticket that both parties need to go on happily ever after.

Stay tuned to our blog for industry M&A analysis and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.

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