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The rumor that Apple will buy Disney is old enough to buy overpriced beer at EPCOT. And here it is again, with so many talking heads oddly inspired by Disney's rehiring of Steve Jobs' friend Bob Iger as CEO.
Indeed, Disney just re-hired Bob Iger as CEO, three years after he stepped down. And it's true that in those three years, Iger said there was a point where the Disney-Apple merger could “kick off.”
Only you have to forget that Iger also said that this was when Steve Jobs was alive. In particular, the two men never talked about the deal.
This doesn't seem to be an important detail. At least not if you are a financial analyst who knows the true value of a good headline.
That's the only thing Apple's announcement of the Disney purchase boils down to. This is a statistic and financial analysis of how much attention you can get by saying it will happen.
“He [Iger] is going to sell the company,” a source identified as a Disney insider who previously worked for Iger told Yahoo Entertainment. “This is the ultimate deal for a final deal.”
Maybe it really was a Disney insider. Maybe it was someone walking by dressed as a Star Wars stormtrooper. The latter seems the most likely, since when they shoot, they also miss nothing.
We have been-here-before, and we'll be back again
Anyway, this is just the latest in a very long line of claims that Apple will definitely buy Disney and do it absolutely any day.
At some point, the analyst actually did some math. In 2017, analyst Amit Daryanani said there was a “coincidence” that meant Apple should buy Disney.
It was “should” not “will” but Darianani made it sound like Tim Cook would be an idiot if he didn't. And – remember, it was 2017 — According to Darianani's calculations, for this Apple will have to take on a significant amount of debt.
Fast to 2022, and now Apple has so much money that it's easy to assume that it can buy anything.
Now the market capitalization of Walt Disney Co. is $175.4 billion. Apple has about $200 billion in cash reserves, according to Investors.com, who also believe the company should be giving it to investors, the “rightful owners,” rather than acquiring firms.
So on paper, Apple has the money to buy Disney, whether or not it makes sense to cut its cash reserves that much. In practice, buying Disney would also cost not $175.4 billion, but more.
You can't buy the company at exactly the price it seems at the moment, or the firm has no reason to let you buy it. However, let's assume that Apple can acquire Disney for less than the $200 billion it has in change.
It's not just the price tag that matters
There's also the rather important fact that Disney has no real reason to sell. Companies may be forced to sell shares by shareholders, but overall, Disney is doing well when viewed as a whole.
And while fans are excited about Čapek's departure, it likely has more to do with the board's desire to make more money and the company having a boyfriend with COVID than anything else, given that he basically implemented the programs that Iger developed. Iger did not return to make a deal with Apple.
Yes, Disney has had some bad years and some costly high-profile mistakes. There is, of course, COVID, which causes the parks to close for a while, and the capacity is reduced even longer.
And then, in 2022, then-Disney CEO Bob Chapek initially opted for “anguished silence” over support for actors protesting Florida's controversial sex education bill.
Chapek eventually spoke out. And when he did, Florida retaliated by trying to remove the — and only Disney — a special tax status that may or may not work, given Orlando's own take on it. Ironically, the governor announced that he was going to focus on Disney's tax status while he stood in another area that had a special tax exemption much like the Reedy Creek deal.
We'll all see how it works when the time comes. But the deal is believed to have saved Disney tens of millions of dollars in taxes in the fifty years since it opened.
The row with Florida could have other financial implications as well. According to BBC News, Republicans in Congress now say they will oppose Disney's Mickey Mouse copyright renewal in 2024 due to the firm's “political and sexual agenda”.
What is at stake is not quite the Mickey we know today, or even the one we knew 50 years ago. Most likely, the original Mickey Mouse from Steamboat Willie could have been in the public domain as early as 1928.
So Disney may be facing the loss of rights to its original Mickey, and it is facing these moves to forfeit its tax credits in Florida. What was more predictable, however, was that its Disney+ streaming service was both successful and troublesome.
Two Sides of Disney+
The Disney+ streaming service launched in November 2019 and aims to have between 60 and 90 million subscribers by 2024. November 2020, just one year instead of five. (Designed to be viewed on TVs, iPhones and iPads, but you can also watch on Macs.)
The problem is that the service is still in its infancy when it requires an investment in technology no less. like everything else. Then, while it has an enviably gigantic material library, what attracts new subscribers most of all is a completely new piece of software.
And few things can be more expensive than television programs, for example, the production of one episode of The Mandalorian costs about 15 million dollars. On top of that, there are other expenses, like marketing, and other revenues, like toys and the parks themselves, that don't count towards streamers' accounts at all, but count towards the company's accounting as a whole.
Disney knew at first that it would lose money due to streaming, and its financial earnings reports consistently predicted this. But he didn't expect to lose $1.5 billion in the final quarter because of it, compared to about $1.1 billion in the previous quarter and $630 billion in the year-ago quarter.
So, Disney+ is a huge success, costing the owner much more than expected. Most recently, the company increased spending on Disney+ streaming, but not enough to hit $1.5 billion in the quarter.
Perhaps the company is vulnerable, although any firm that bought it would face the same problems and the same costs.
It's not easy before Disney and Apple
Let's say Tim Cook is eager to see more episodes of Obi-Wan Kenobi, and Bob Iger really wants to see the Apple logo on Cinderella's castle in the Magic Kingdom. The two firms are still so big that any deal must be done with US regulators.
There is no more certainty that they will receive a positive response than that they will receive a prompt response. More recently, a US judge denied the much smaller publishers Penguin Books and their rival Simon & Schuster to a merger in what Reuters said was just a $2.2 billion deal.
In this case, the argument was that a merger of the two firms would reduce competition and also reduce advances for their authors. Disney might like to lower what it pays creatives, but that's what led it into costly hot water with actress Scarlett Johansson.
Apple doesn't buy firms on a whim
We all spend more on something than we should, simply because that we wanted it. But we're not Apple, which has no reason to want Disney other than that it will expand its Apple TV+ library.
Apple has had the ability to buy content libraries before, and reportedly even had some early talks with MGM. But he passed this deal and did not introduce any others.
Steve Jobs bought Pixar from Lucasfilm because the price was right. Disney bought Pixar because its animation studios were no longer making the hits it needed. And then Disney bought Lucasfilm because George Lucas was ready and the price was good.
Therefore, huge companies will buy other huge companies, but only when the price is less than the value they get from it. Disney isn't ready to be part of a bigger synergy machine than its own, and Apple doesn't seem to be poised to meddle in the theme park business, even partially.
Disney isn't in a weak enough position to make it profitable for Apple, and it doesn't have anything in particular that Apple needs.