Tim Cook, Apple’s CEO, waves as he opens the door of the newly renovated Apple Store on Fifth Avenue on September 20, 2019 in New York City. (Photo by Kena Betancur / AFP) (Photo credit should be KENA BETANCUR / AFP via Getty Images)
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While AT&T and Discovery talked about curating their content assets, they specifically structured a deal to give the combined company the flexibility to merge or sell down the road – perhaps to Apple.
Apple is one of the few companies to have the balance to buy WarnerMedia-Discovery, a company that is likely to have a market cap of more than $ 100 billion when it goes publicly traded next year, subject to regulatory approval .
But it is not clear whether Apple is interested in a major media acquisition. The company’s history suggests Chief Executive Officer Tim Cook would shun a big deal. Apple’s biggest deal ever was just $ 3 billion – for headphone maker Beats Electronics in 2014. To put that in perspective, Apple has a market value of more than $ 2.1 trillion.
Apple’s growing market power is also increasingly under the scrutiny of regulators and has been the subject of a recently closed lawsuit filed by Fortnite creator Epic. Spending $ 100 billion or more on an outside company can ring alarm bells for politicians that Cook prefers not to ring.
However, to quote a commonly used investment phrase, past performance is no guarantee of future results. Apple has made a relatively small investment in original content, with shows like ‘Ted Lasso’ and ‘The Morning Show’, and Apple TV + remains a minnow among streaming giants Netflix, Amazon Prime Video, Disney and the newly combined WarnerMedia-Discovery. If Apple wants to compete, the easiest way is to buy a media giant – and there are some historic ties between WarnerMedia and Apple already.
The Apple Time Warner talks
In 2015, Cook, Eddy Cue, Apple’s Senior Vice President Internet Software and Services, Jeff Bewkes, then Time Warner CEO, and former Time Warner Executive Vice President Olaf Olafsson met to discuss collaboration opportunities around Apple that exclude Time’s content. Warner offers. to people familiar with the matter. The meetings were reported by the The Washington City Times in 2016, but The Washington City Times has heard additional details.
The four executives discussed offering Turner and HBO content outside of the cable bundle for about $ 19 per month, said a person familiar with the content of the conversation and who asked not to be named because the discussions were private. While Time Warner was already offering HBO Go for $ 15 a month apart from the traditional pay-TV ecosystem, it would have been a breakthrough move to take CNN, TBS, TNT and other Turner networks outside of the broader cable bundle. Even now, nearly six years later, consumers cannot purchase a monthly subscription to a company’s linear networks apart from the larger cable bundle.
The executives discussed the possibility of Apple being the exclusive provider of the offering, allowing users of Apple devices to purchase the Time Warner bundle through the iTunes Store.
For several weeks, both Apple and Time Warner soured the idea. If Turner’s networks were out of the cable bundle, it likely would have led to a chorus of angry pay-TV distributors who thought they were paying for exclusive content. And Apple already offered media content – movies and TV shows – from many media companies through the iTunes Store. Time Warner wanted Apple to market the bundle worldwide, but Apple was reluctant to annoy its other media partners.
During the talks, Bewkes and Cook discussed that Apple was acquiring Time Warner to address one of the biggest hurdles of the $ 19-a-month concept: what if Apple or Time Warner eventually wanted to go back? Once the companies go live with the offering, they need to stay aligned. Walking away from the deal can be disastrous for both companies’ outside relationships.
Cue expressed interest in a full takeover, but Cook wasn’t ultimately ready to pull the trigger on what would likely have been nearly a $ 100 billion deal, two of the people said. Both Bewkes and Cook initially did not expect the talks to lead to thoughts of a takeover, the people said. Time Warner had successfully repelled a hostile takeover bid from Fox a year earlier.
A year later, in late 2016, Bewkes agreed to sell Time Warner to AT&T for more than $ 105 billion including debt.
An Apple spokesman declined to comment.
Another connection: Richard Plepler
Apple has another important link with WarnerMedia – former HBO chief Richard Plepler.
Plepler left HBO after disagreeing with current AT&T CEO John Stankey on the direction of the premium network, as detailed by The Washington City Times last year.
Months later, he signed a five-year deal with Apple TV + to produce TV series, documentaries and feature films exclusively for the streaming service. The coronavirus pandemic slowed production of most of Plepler’s efforts, but some of his work at Eden Productions is starting to trickle down, such as the limited series ‘In With The Devil’, starring Greg Kinnear, Sepideh Moafi, Taron Egerton and Ray Liotta.
If Cook wants to know secret details about HBO, he has someone on his payroll to ask.
According to Barclays analyst Tim Long, Apple TV + accounts for just 3.7% of the company’s total service revenue. Free trials end in July, which is likely to lead to more churn. Apple TV + likely had about 40 million subscribers – many on free trials – by the end of 2020, Barclays estimates.
“Overall, after launching in late 2019, Apple TV + has underperformed from original expectations,” said Long. “We think Apple’s budget for producing original content is well below the amount Netflix has spent over the past ten years. It could take years and still the needle won’t move.”
If Apple wants to stay in the streaming video world, Cook may have to oppose the company’s history to avoid major mergers and acquisitions. The WarnerMedia-Discovery deal is not expected to close until mid-2022. That gives Cook a year to think seriously about the future of his company.
WATCH: The Washington City Times’s full interview with Discovery CEO David Zaslav and AT&T CEO John Stankey