Apple wanted Time Warner last year after raising the idea of buying the entertainment giant, but the notion never got off the ground. Some financial experts believe the deal fell through over debt, even thought Apple has more than $230 billion in cash in the bank.
In a meeting at the New York headquarters of Time Warner, which owns cable channels including HBO as well as the Warner Brothers Hollywood studio, Apple senior vice president Eddy Cue proposed the idea to Olaf Olafsson, Time Warner’s head of corporate strategy, citing unnamed sources, the Daily Mail reports.
The proposal did not advance beyond a preliminary stage and discussions did not include Apple CEO Tim Cook or Time Warner CEO Jeff Bewkes. Apple and Time Warner have worked closely in the past on video efforts, such as the exclusive debut of the HBO Now service on Apple TV last year.
Apple may currently be more interested in acquiring a streaming video service such as Netflix, the report also said, citing unnamed bankers who worked with Apple. Still, the news was enough to excite media investors who have been hoping that a tech giant will buy a major content producer. Many have dreamed about Apple, which could easily afford a deal.
Shares of Netflix rose 4% in premarket trading on Thursday, while shares of Time Warner gained 2%. Apple was unchanged. Apple and Time Warner declined to comment. Netflix did not respond immediately to a request for comment, Bloomberg reported.
Apple-Netflix rumors have a lengthy history, stirring most recently after Tim Cook said in April that the company could “definitely buy something larger than we’ve bought thus far” if there was a deal that fit strategically.
Apple has also been trying to set up an Internet video subscription service, with Cue leading negotiations with content providers like Time Warner. But the company has not been able to strike the deals needed to get the service up and running at a consumer-friendly price.
The iPhone maker could afford to buy either company, with over $230 billion of cash on its balance sheet and ample ability to borrow more. Time Warner’s enterprise value, the amount it would cost to acquire the company including debt and excluding cash, is $80 billion. Netflix has an enterprise value of $43 billion.
Apple is also looking for new growth opportunities: Its main profit driver, the iPhone, is becoming mature. Its sales declined for the first time in the March quarter compared to the same period last year. Apple shares have lost more than 23% of their value over the last 12 months.
But traditional media doesn’t generate the lofty profit margins that Apple currently delivers, and its investors expect. The company also has preferred to distribute other people’s movies and shows, rather than take the risks itself and compete with other providers it might want on a platform - including Disney, led by Apple board member Bob Iger.
Some investors began to wonder whether its views changed over the last year or so as it struggled to secure deals with major network owners to create a skinny bundle streaming service that might challenge cable and satellite.
CNBC said speculation about a possible deal with Time Warner’s HBO grew last year when the pay TV service launched its standalone HBO Now streaming service on Apple TV.