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Rumors that Apple will buy Disney are old enough to buy overpriced beer at EPCOT. And, it’s back again, with a lot of talking heads oddly inspired by Disney’s rehiring of Steve Jobs’ friend Bob Iger as CEO.
It is true that Disney rehired Bob Iger as its CEO three years after his resignation. And it’s true that in those three years, Iger said there was a point where a merger between Disney and Apple could be “there.”
Only, you have to forget that Iger also said this when Steve Jobs was alive. Very specifically, the two men never once talked about a deal.
This is apparently not an important detail. At least, if you are a financial analyst who knows the true value of a good title.
This is just what this claim of Apple buying Disney comes down to. Statistics and financial analysis of how much attention you can get as it will.
“She [Iger] going to sell the company,” said a source described as a Disney insider who worked for Iger Yahoo Entertainment. “This is the final deal for the final dealmaker.”
Maybe it really was a Disney interior. Perhaps it was someone passing by in one star wars Stormtrooper outfit. The latter seems likely, since when they shoot, they hit nothing.
We’ve been here before and we’ll be back
Either way, it’s the latest in a long line of claims that Apple is sure to buy Disney and will do so any day now.
At one point an analyst actually did some math. In 2017, analyst Amit Dariani said there was a “confluence of events” that meant Apple should buy Disney.
It was “should,” not “will,” but Dariani made it sound like Tim Cook would be a fool not to. And — remember this was 2017 — Darianani’s calculations said Apple would need to take on significant debt to do so.
Flash forward to 2022, and now Apple has so much money that it’s easy to assume it can buy anything.
Right now, Walt Disney Co has a market capitalization of $175.4 billion. Apple has cash reserves of about $200 billion, according to Investors.comWhich also believes that companies should give companies to investors, the “rightful owners”, instead of acquiring them.
So on paper, Apple has the money to buy Disney, whether it would be wise to deplete its cash reserves so much. In reality, it wouldn’t cost Apple $175.4 billion to buy Disney, it would be much more.
You don’t get to buy a company that looks valuable right now, or the firm has no reason to let you buy it. Still, let’s say Apple can acquire Disney for less than the $200 billion it’s in loose change for.
It’s not just the price tag that matters
There is also little significant information that Disney has no real reason to want to sell. Companies may be pressured to sell by shareholders, but overall, Disney is doing well overall.
And, while fans are excited about Chapek’s departure, it’s probably more about the board wanting to make money, and about the company being in the covid-fall-guy, than anything else, given that he’s implementing programs mostly created by Iger. Iger never came back to make a deal with Apple.
Yes, Disney has had a few underperforming years and some costly, high-profile missteps. Of course there’s covid, which closes parks for a while and reduces capacity for even longer.
And then, in 2022, then-Disney CEO Bob Chepek essentially chose “painful silence” rather than support cast members protesting against Florida’s controversial sex education bill.
Chapek finally spoke. And when he did, Florida retaliated by trying to remove Disney’s — and only Disney’s — special tax status, which may or may not work, depending on how Orlando itself feels about it. Ironically, the governor made his announcement that he was going to focus on Disney’s tax status, standing out in another area that had a special tax distribution, much like the Reddy Creek deal.
We will all see how this works out in the fullness of time. But, because of that deal, it is believed that Disney has saved billions of dollars in taxes over the fifty years since its launch.
The row with Florida could lead to more financial losses. According to BBC newsRepublicans in Congress now say they will oppose renewing Disney’s copyright on Mickey Mouse in 2024 because of the firm’s “political and sexual agenda.”
The Mickey we know today or even the one we knew 50 years ago is not quite the Mickey. Rather, the original Mickey Mouse from “Steamboat Willie” may have entered the public domain in 1928.
So Disney could face losing its rights to the original Mickey, and it’s facing moves to strip it of its Florida tax benefits. More predictable, though, was that its Disney+ streaming service would prove to be both a success and a problem.
Two sides of Disney+
The Disney+ streaming service launched in November 2019 and aims to have 60 million to 90 million subscribers by 2024.
Instead, it easily beat it in November 2020 after just one year instead of five years. (It’s intended for viewing on TV, iPhone, and iPad, but you can also watch on Mac.)
The problem is that the service is still in its early days when it requires investment like anything else in technology Then while it has an enviably huge library of material, what drives new customers the most is the brand new programming.
And nothing is more expensive than television programming, for example, “The Mandalorian” alone costs about $15 million per episode. Then there are other expenses such as marketing, and other income such as toys and parks, which are not counted in the streamer’s account at all, but are counted in the accounting of the company as a whole.
Disney knew it would lose money with streaming first, and its financial earnings calls consistently predicted that. But it did not expect to lose $1.5 billion last quarter, up from about $1.1 billion a quarter earlier, and $630 billion in the year-ago quarter.
So Disney+ is a huge success that is costing its owner much more than expected. It most recently increased spending on Disney+ streaming, but not enough to make $1.5 billion a quarter.
Maybe the company is weak, although any firm buying it will accept the same problems and the same costs.
It’s not just up to Disney and Apple
Say Tim Cook is dying to see more episodes of “Obi-Wan Kenobi” and Bob Iger is eager to see an Apple logo on Cinderella’s castle at the Magic Kingdom. The two companies are still so huge that any sort of deal would have to go to US regulators.
It is no more certain that they will get a favorable response than it is likely that they will get one quickly. More recently, a US judge refused to allow Penguin Books and its rival Simon & Schuster to merge several smaller publishing houses. Reuters Said that there was only one $2.2 billion contract.
In that case, the argument was that a merger of these two companies would reduce competition and also reduce the advancement of their authors. Disney may want to cut back on what it pays creatives, but it’s gotten into expensive hot water with actor Scarlett Johansson.
Apple doesn’t buy companies on purpose
We have all spent more than we should, just because we wanted it. But we’re not Apple, which has no reason to want Disney except to see how its Apple TV+ library will balloon.
Apple has previously had an opportunity to buy the library of content and has even reportedly held some preliminary talks with MGM. But it passed on that contract, and introduced no other.
Steve Jobs bought Pixar from Lucasfilm because the price was right. Disney bought Pixar because its animation studios were no longer producing the hits it needed. And then Disney bought Lucasfilm because George Lucas was ready and the price looked good.
So giant companies will buy other giant companies, but only when the price is lower than the quality will they get. Disney isn’t ready to be part of a synergy machine larger than itself, and even Apple doesn’t seem inclined to get into the theme park business.
Disney isn’t in a weak position to make it a bargain for Apple, nor does Apple have any special needs.