We have previously written that it would make sense for Apple (AAPL) to acquire Disney (DIS). Apple and Disney could certainly hold informal talks now, but a letter of intent, formal due diligence and the purchase agreement negotiation would all have to wait until there is a new Administration in the White House in my view as I don’t see Lina Khan’s FTC allowing such a deal to pass.
Disney’s basket of movie, video game and sports intellectual property would enable Apple to attract millions of new subscribers each year as Apple grows its Services business.
If Apple were to acquire Disney and publish the next generation of ESPN/ live sports, Star Wars, Marvel and legacy Disney content in native Virtual Reality, it could be a significant catalyst toward attracting younger subscribers.
Over time I would expect investors to attach a higher multiple to Apple’s subscription revenue as that revenue stream grows. Subscription revenue is higher quality revenue than Product and Advertising revenue streams which are more transactional in nature.
Further regarding subscription revenue, it is clear where Apple can generate recurring revenue across its portfolio. Similarly, Google (GOOG) is in the process of growing subscription revenue through YouTube premium, YouTube Music Premium, YouTube TV, Google FI and through storage for its various services (Gmail, Drive, Photos, etc.), as well as its enterprise offerings. Likewise, Amazon (AMZN), has a subscription revenue play through its AWS unit (I would spin off AWS). META seems to be the company without an obvious source of significant subscription revenue.