Thinking Differently about Apple Spending Billions to Buy a Big Media Company

The Apple TV Crystal BallApple is reportedly planning to ramp up spending on original content to "several hundred million dollars a year," according to an unnamed source cited by The Financial Times of London. The story was based in part around a supposed meeting where Apple senior vice president Eddy Cue pitched the idea of Apple buying Time Warner, but the takeaway should be that Apple is seriously committed to streaming content.

The idea is this: Apple buys a company like Time Warner to get its vast portfolio of movies (new and old), and properties like HBO, CNN, and Turner Broadcasting.

Oh! Fun thought: Apple buys Time Warner and hires Jon Stewart to run CNN, something I think Mr. Stewart would be keen to do. That's pure speculation and a flight of fancy, but what a great idea. Anyway...

So, Apple buys that kind of content, and then it can use it to form the foundation for the Apple TV streaming service we know the company has been working on since before Steve Jobs passed away.

We've heard various iterations of this for years involving all kinds of media companies, but Time Warner is one of the big dogs. And I mean big dogs. Rupert Murdoch's 21st Century Fox offered US$86 per share for Time Warner in a deal that would have valued the company at more than $60 billion.

Time Warner turned it down, and you could bet it would ask for an even bigger premium from the world's largest corporation. Time Warner's stock closed today at $74.04, a gain of $1.112 (+1.52 percent) for a market cap of $57.4 billion.

But that's cool, because Apple has all the money. $216 billion at the last counting, and never you mind about most of it being offshore. Apple could borrow for a deal like this until the cows come home.

Naysayers might also point out that Apple has never ever made an acquisition so big. It's true, and I'll add that Apple has never bought a revenue stream. But there are two things about this that should reset your expectations.

One is that Apple CEO Tim Cook said point blank he would consider larger acquisitions than Apple has made in the past. At the time, I took this to mean a technology-related company and struggled to imagine what that would mean for Apple. As big as the company is, I don't fancy the prospects of Apple trying to integrate a huge tech company into Apple's culture. This is one of the cornerstone principles of Steve Jobs's management philosophy, a philosophy enshrined in Apple University.

The second thing is that buying a company like Time Warner (or another media giant) wouldn't be the same as Apple buying, say, Tesla. Apple could own a media giant without needing or wanting to integrate it into Apple's overall corporate culture. A media company could do its own thing—what Apple really needs are the rights to its content, something Apple could get without subsuming the entire company.

I suspect a media purchase was precisely what Mr. Cook had in mind when he made that comment. It might not be Time Warner—and those talks were essentially described as off-the-cuff, rather than dedicated—but The Financial Times quotes another anonymous source as saying, "[Apple has] been on the lookout for content assets for several months."

One more tidbit from this article is that Apple is still considering Netflix. By buying that kind of media company, Apple would be in a better position to offer content from all the other media companies out there, while still buying some world-class original content and the development studio producing it.

One way or another, we're going to see a big media acquisition from Apple. It's only a matter of who and when.