Why Apple Should Buy Lionsgate
Allow me to put on my M&A hat...
Apple clearly wants to get into the content/streaming business; a little while ago, it poached the top two execs from Sony TV to develop new programs for Apple. So Apple clearly wants to compete with the likes of Netflix, and here's why purchasing Lionsgate is the way to do. it
Lionsgate recently purchased a majority stake in 3 Arts Entertainment, which is probably the preeminent talent manager in Hollywood. They represent, among many others, Kevin Hart, Tina Fey, Amy Poehler, Mike Judge ("Silicon Valley"), Mike Shur ("Brooklyn Nine-Nine"), the guys who created "It's Always Sunny in Philadelphia"... bottom line, they're an entertainment juggernaut.
And if Apple owned Lionsgate, they'd most likely have first crack at the material being pitched/produced/offered by 3 Art's long list of A-List stars, which could then translate into a long list of high quality content for Apple that is now the lifeblood of successful streaming companies.
And where would they stream this high-quality content? On Apple's already-existing distribution channels; hell, everybody owns an iPhone (yes, an exaggeration), and let's not forget about Apple TV.
This alluring combination -- the high quality content from 3 Art's A-list roster of talent, along with Apple's already-existing potent distribution channels -- would make Apple an instant and formidable competitor in the lucrative world of streaming.
I would be careful about making assumptions based on who they hired; a while back Apple hired ex-Fiat people for a potential car but that never happened and will probably not happen any time soon. I wouldn't be too confident about Apple's distribution channels either; in 2017 they lost quite a bit of market share to Amazon and Roku with the risk that this trend will continue in 2018/2019. Lionsgate market cap is $4.79Bn which with a probably premium would rise to $5Bn in an acquisition. Are they willing to spend that much? Out of all their acqusitions only 1 surpassed the $1Bn mark and that was the $3Bn acquisition of Beats which makes sense because Music is their bread and butter. If you look at their recent deals (past 2 years) they have been either for hardware or to fit in with existing software such as navigation, music, algorithms and coding. I think if they entered that market with such as large initial acquisitions it would hurt them and they would get eaten by the large market incumbents such as 20th Century Fox, Paramount Pictures (part of Viacom), Warner Brothers (part of AT&T) and Netflix.
I hear what you're saying about Fiat, but their content push is already happening. They've already inked deals with a variety of actors (I think they've got a high profile one with Jennifer Aniston and Reese Witherspoon, among others), so they're already in the process of making shows.
And yes, historically, their acquisitions have been relatively small... but they've got, what, 250 billion in cash burning a hole in their pocket, which would mean that a 5 bil acquisition would account for a mere 2 percent of their cash on hand! This would be an insanely small risk for them.
Also, I would argue that they are somewhat in the "content" business already with music (granted, they don't produce their own music), and I think they want to break out of the distribution shell and become content providers because then their stock might be accorded a higher multiple; after all, look at the Netflix forward PE (90) compared to Apple's (14)... multiple expansion would unlock a lot of value for this stock, and becoming a content provider might just be the way to do that.
Sure but also consider that they haven't been doing as well in content streaming as people think, just look at their music. Music is and was their best outlet yet they are only doing well(ish) in the US and getting eaten by Spotify in Europe, Asia and soon in India (where Spotify is OS agnostic and less than 10% of users have Apple devices). Content streaming for films and TV would be the same thing if they try to go up against Netflix.
I'm not sure if it would be the same thing -- quite frankly, I think it depends on the content. Look at Netflix -- they were nothing, but then got a hot show in "House of Cards" and they started attracting a ton of talent and projects that people wanted to see. I think Apple could accomplish the same thing if they play their cards right and they get their "lightening-in-a-bottle" show.
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