Apple (AAPL) should buy Disney (DIS) – at least according to a media analyst.
Following Apple’s launch of its Vision Pro headphones at its Worldwide Developers Conference (WWDC) on Monday, Needham analyst Laura Martin confirmed that the tech giant is set to acquire the entertainment company.
“AAPL must purchase DIS to drive adoption of Vision Pro,” she wrote in a memo released Tuesday. “The fact that DIS CEO Bob Iger was on stage to tout AAPL’s Vision Pro eyewear demonstrates the compelling strategic fit between DIS’s content and AAPL’s wearable technology.”
“At $3,500, we expect adoption to be slow. However, if AAPL acquires DIS, its storytellers could create unique content to drive consumer adoption of AAPL’s Vision Pro eyewear,” the analyst added.
Disney shares jumped 4% as soon as Iger started speaking at Monday’s event. The executive touted a new partnership between the two companies centered on the helmet. Users will be able to watch movies and TV shows from Disney+, in addition to a more immersive sports viewing experience.
Disney shares have since stabilized, but the positive upward movement is fueling long-standing rumors regarding a possible merger between the two companies.
Martin explained how exclusive content will be key to boosting sales of the new headset, referencing how Steve Jobs was able to secure iPod adoption by having music companies sell him individual songs.
“No one would have bought an iPod if it didn’t have content to drive adoption,” she said. “[The VR headset] is not a massive product, so you need to have content that makes people want to use it.”
Martin pointed out that the advantage for Apple would be to secure not only the IP, but also the storytellers.
“You can’t force Disney content creators to do anything unless you own them,” she said, dismissing suggestions that partnership would suffice as opposed to full ownership. since Disney would like to protect its P&L (profit and loss) and maximize revenue.
“My idea would be that it would be exclusive to this one platform,” she said, adding, “It’s worth more for Apple to have these storytellers and to tell stories specifically for an iPhone, an iPad or a show.”
Martin cited the lack of a successor to Iger at Disney, coupled with its shrinking linear TV business, as key catalysts for a merger, adding that Apple’s $90 billion in annual free cash flow would help fund content creation.
Yet a big question mark revolves around park activity, in addition to regulatory hurdles.
“I don’t think Apple wants Parks, but I think Parks is a really good business in its own right. Private equity or some other type of REIT or real estate buyer would be a logical place,” a- she declared.
In terms of regulation, the analyst said it was not impossible that a deal of this magnitude would receive approval.
“The way the laws are written here, it’s not anti-competitive to have a hardware company, or let’s call it a distribution company, to own a content company,” she said, referring to how Comcast was able to merge with NBC, which was a similar size to Disney at the time, in addition to Amazon’s recent purchase of MGM for $8.45 billion in 2021.
“It’s possible that regulators will try to block it. But once you go to court, all the precedents allow content to be purchased by distribution,” she said.
Alexandra Channel is a senior reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com
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