Monday, April 2, 2018

Apple Buys Netflix | Lefsetz Letter

And you wondered what they were gonna do with all that repatriated cash.

The truth is Tim Cook has been propping up the stock with buybacks for years, funnily enough borrowing the money to do so, knowing he had all that moolah overseas. But without any growth opportunities on the horizon, with no breakthrough hardware product imminent, he’s decided to break Apple’s mantra “not invented here” and purchase an outside product to leap ahead.

The truth is Steve Jobs was never against this. He stole the graphical user interface from Xerox, he bought SoundJam to make iTunes, and the self-satisfied inheritors of his legacy have yet to learn his lesson. Rumor has it Steve’s widow Laurene called Cook to complain, to inform him of the past to get on the right path, but I haven’t seen that confirmed anywhere.

Now there’s precedent here. Google bought YouTube and Facebook bought WhatsApp and Instagram. And look at them now! You get to the point where you run out of ideas and you just purchase those of others.

And no one else can afford Netflix.

But Apple can. A hundred billion when they’ve got a multiple of that in the bank? NO PROBLEM!

So the entire landscape is rejiggered. Suddenly, Amazon has a deep-pocketed competitor in visual media. As for the TV networks, one knows they’re no match for a techie. Napster and Spotify, need I say more?

Apple tried to go it alone. But none of their shows has worked and the big investment in Witherspoon and Aniston… One show does not a network make. Your distribution pipeline needs product, which is why all the major labels make deals with the indies, they’ve got baked-in overhead. And without catalog, you’ve got a sea of red ink. You need past hits to keep you alive while you’re sorting out new.

Meanwhile, this keeps Apple from doubling-down on data, something Cook said last week the company would never do. Then again, Netflix decides what to make and promote based on what its users watch, so that’s kinda contradictory.

So where does this leave the landscape?

The studios are history. There’s nothing that says Netflix can’t make superhero flicks, and as a matter of fact they do! Can you say JESSICA JONES? The studios have backed themselves into a corner, a self-satisfied one, they thought they ruled the culture when the truth is tech does, and we’re all addicted to our mobile devices. If I hear one more director say their film was not made for viewing on an iPhone… The same damn people who shoot and edit digitally. It reminds me of the musicians bitching about streaming while they make their music on laptops and promote it for free online.

And the conglomerates??

Viacom… TOAST!


Disney? A day late and a dollar short. So busy focusing on theme parks and monopolies, they’re behind the eight ball. That’s right, Apple kills legacy ports. Gets rid of the old before their time. Whereas Disney milked ESPN to the very end, who’s gonna overpay to see these sports in the future? CERTAINLY NOT THE NEARLY NINETY MILLION PAYING CABLE SYSTEMS NOW! And Disney is based on LESS product, whereas Netflix is based on MORE! Disney is out of touch with the times, Iger should have gone years ago, this is the guy who couldn’t even pick a winning football franchise!

And then there’s HBO/Time Warner. Don’t expect the AT&T sale to go through. Furthermore, HBO’s got the wrong model too. A thin cross-section of product dribbled out. Netflix already has three times the subscribers of HBO, and it’s only going to get worse. The rich get richer and the poor get poorer.


Amazon is gonna buy Time Warner. Yup, you heard it here first. Sure, Bezos usually doesn’t spend, but this Apple acquisition of Netflix illustrates there are only a few chairs left in this musical game, and Amazon doesn’t want to be left out.

And the new head of HBO? JIMMY IOVINE!

The truth is Iovine is being squeezed out of Apple. Hell, Cook doesn’t want to admit he made a mistake with the headphones and the needed to be rewritten software for the streaming service. Hell, you read last month’s story about Apple developing its own cans, right?

“Apple Turns Up Audio Ambition With High-End Headphones”

Beats are crap.

But “The Defiant Ones” was a huge success. And HBO needs a rainmaker. And Iovine doesn’t want to go back to a label. And everyone other than Bezos is faceless at Amazon. A perfect solution!

As for the other channels… TBS and TNT… Bezos doesn’t want them, they’re gonna be spun off, just like Parlophone in Universal’s purchase of EMI.

The good times will continue to reign for producers. With Apple and Amazon bidding up fees. But it won’t last forever, one outlet will win, and then fees will go down, just like in the movie business. But it’s an on demand all the time world we now live in and will be forevermore. Meanwhile, both Netflix and Amazon have made movies in the past, and Netflix goes day and date on its service, so expect all those movie theatres to…

Be in big trouble.

Reed Hastings will continue to run Netflix. But he’s angling for Cook’s job. Cook just might declare victory and move on, he hasn’t got a creative bone in his body. As for Jony Ive, he will only stay if he gets to redesign the Netflix logo, employing skeuomorphism, you see it really is a return to Jobstown!

As for Ted Sarandos…

He’s jumping to Spotify. That’s the secret sauce in the streaming company’s Wall Street listing. Sarandos is gonna convince the best bands to forgo the major labels and sign directly with Spotify, just as he did with visual talent at Netflix.

As for the other Silicon Valley titans…

Google is taking out more ads and billboards for YouTube Red, believing if the public just knew about the service, it would win. But there’s no truth you can only see the promotions with Google Glass.

Facebook is buying Snapchat. Snapchat is in a death spiral, shedding workers, and now Zuckerberg can get it for cheap, paying in stock, which has been devalued as a result of the Cambridge Analytica crisis. Of course, Instagram is a solid competitor to Evan Spiegel’s creation, but the ink is dry, no later than May 1st the combined entity will be known as INSTACHAT!

Microsoft? Steve Ballmer destroyed that company. Can you say NOKIA? Can you say SKYPE? Redmond is sitting on the sidelines, licking its wounds, just hoping to survive.

So it’s all about software and services, and the entity that controls them wins.

And the cable systems and channels never got the new model, believing that they’d just migrate the old one to the internet, that you’d pay for multiple services, how wrong they are. You’re gonna end up with two. Amazon, because it’s baked into Prime, and Netflix, because everybody else is there.

I know this is a lot to digest. Especially since the mainstream media was so busy producing fake news for ratings that they missed it completely. But not Trump, he’s ahead of the game, he’s signed for a news deal with Bezos, you see all that Amazon bashing was really just a negotiation, when Trump’s gone from office he’s just gonna stream his b.s. And Ivanka will be able to sell her tchotchkes on Amazon too. It’s a win-win.

Proving, once again, you’ve got to be deep inside to truly know the game.

No wonder so many Americans vote against their interests.

So all Apple television projects will now be under the banner of Netflix. Those Sony guys will be like a studio within, just like Luc Besson’s EuropaCorp:

“Report: Netflix is ‘in advanced talks’ to acquire Luc Besson’s EuropaCorp studio”

All this consolidation is good for Wall Street but bad for consumers. But what else is new.

The world is getting smaller and circling the drain at the same time.

If you’re depressed about it, pull up “13 Reasons Why.”

Or “Narcos.”

That’s right, Apple sells tools for fools.

And those fools are US!


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