What if Apple buys over Netflix?

As unlikely as it seems, Apple is contemplating a future after the iPhone.

As customers become less interested to upgrade to new, more expensive iPhones each year and investors’ expectation of higher and higher revenue targets become more challenging, Apple will have to explore other options to deliver on its commitments.

One such option is a move from a device manufacturer to a service provider. Talks about Apple shifting its focus to providing content is gaining prominence even if – at this point in time – the talks are mostly speculation.

The latest of which is from Samik Chatterjee, an analyst at JP Morgan who thinks, while it is very unlikely, acquiring content streaming giant Netflix can put Apple in an advantageous position as a content creator in a future that’s less dependent on income from the iPhone.

“We think Netflix is best strategic fit on leading position in engagement level as well as original content, differentiating itself from pure aggregators of content,” J.P. Morgan analyst Samik Chatterjee told CNBC this week. “We believe there is value to acquiring the most successful player in this space, which is hard to replicate with a smaller player in this market.”

The content industry is highly entrenched and tremendously competitive, to create a business from scratch in this space will be a daunting task to say the least, even for Apple. An acquisition is the most likely route for Apple to take if it decides to continue down this path, and Netflix is Apple’s best bet as the content streaming service is present in several key markets for Apple.

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“Video streaming, including original video content, is a highly competitive market with established traditional media houses as well new entrants fighting aggressively for incremental subscribers, which is likely to make it difficult to scale any new platform to compete effectively,” Chatterjee said.

Other than Netflix, Chatterjee names gaming powerhouse Activision Blizzard and speaker manufacturer Sonos as possible options should Apple consider content as its next big thing. However, he points out that such acquisitions unlikely, at least at the moment.

Acquiring Netflix would cost Apple an estimated US$189 billion. While Apple does have the cash and means to raise the funds necessary to buy Netflix outright, it will put a huge dent in Apple’s US$250 billion cash reserves. If Apple does pursue this, it is a gamble that the company can’t afford to lose.

Read the full CNBC report here.

Amin Ashaari