Is Apple the Best Buyer for ESPN?

Wedbush analyst Dan Ives appeared on Bloomberg Surveillance on Aug. 17. He suggested that it’s not a matter of “if” Apple (AAPL) buys ESPN but “when.”

Nearly a week has passed since Ives’ comments. Google “Dan Ives Apple ESPN buy,” and you get more than 815,000 results. Both Apple and Disney (DIS) shareholders should be intrigued by the news.

However, it’s not the first time Apple’s been part of Disney-related speculation. Periodically, rumors surface that Tim Cook will buy the whole company, not just ESPN. 

When you’re a long-time Disney shareholder -- its stock traded this low in the March 2020 correction; before that, you have to go back to 2014 -- you’re willing to believe anything that will get you into positive territory on your investment. 

The big question here isn’t whether Apple should buy ESPN -- it’s got plenty if Cook wants to go shopping -- but whether Apple is the right buyer for the cable sports network.

Here are some potential buyers other than Apple.

Finding the Potential Candidates

Assuming Apple is even interested in ESPN, other companies wanting to wrestle it away from Tim Cook must have solid balance sheets. There will be no paupers in the mix. 

“An acquisition or strategic partnership with the sports channel would be ‘a no brainer,’ wrote analyst Dan Ives. He said that buying ESPN would probably cost more than $50 billion, but would “make a ton of strategic sense” by giving Apple valuable sports content, major TV rights, and ‘change the cross-sell opportunities and attractiveness of Apple TV looking ahead,” Bloomberg wrote on Aug. 17. 

So, I screened for public companies with market caps of $100 billion or more and net cash on the balance sheet. Except for Berkshire Hathaway (BRK.B), I’ve excluded all financials. That leaves me with 30 possibilities, including Apple and Berkshire.

Further, it probably doesn’t make sense for companies in the energy, health care, or industrial sectors to make a bid. Even tech is a bit of a long shot. Of course, Apple is in that sector, so tech stays. 

This leaves me with 20 realistic names. 

The Main Contender - Apple Top’s the List

Apple is the first name on the list. Ives logically argues why it might pay upwards of $50 billion to corral ESPN.

“Apple recognizes that in this streaming arms race there is a ‘closing window’ for the stalwart to acquire content and cement its footing in the live sports content arena,” Bloomberg reported the analyst’s comments. 

This is true.  

At the moment, Apple’s live sports are restricted to Major League Soccer and Major League Baseball, but apparently, it wants other professional sports as well. Go big or go home. It has the money. 

Of course, adding ESPN would make its non-sports streaming content look even thinner than it already is.

With net cash of almost $37 billion, it’s right at the top of the list. 

The Other Tech Contender 

The other tech contender would be Microsoft (MSFT). 

Microsoft is on the verge of getting very big in video games through its $69 billion acquisition of Activision Blizzard (ATVI). It would enable the software company to leverage sports programming through its gaming unit.  

However, given MSFT is paying for the entire deal in cash, it might knock the company out of any near-term, large-dollar acquisition of ESPN. It might be able to entice Disney shareholders with an all-stock deal, but that’s purely speculation.

The Best of the Rest

From the communications services sector, you’ve got Alphabet (GOOGL) with $84 billion in net cash and Meta Platforms (META) with net cash of $13 billion.

In December 2022, YouTube won the rights to the NFL’s Sunday Ticket games starting this year. It paid out approximately $14 billion for the seven-year deal. It’s available on both YouTube TV and YouTube Primetime Channels. 

Getting the NFL indeed intensifies the question of where it goes after Sunday Ticket.   

As for Meta, I’m not sure it has the deep pockets of Alphabet, but 20 WNBA games this season will be seen on the Meta Quest virtual reality platform and through its Xtadium app, so it’s in the game.

A quick word on Netflix (NFLX): It is bypassing live sports for sports-related programming. For example, it’s got a current documentary, Quarterbacks, which goes behind the scenes with NFL quarterbacks. While it could certainly change its mind, it’s not a serious contender for now. 

Lastly, and this is more of a joke, would be Warren Buffett’s holding company. In the second quarter, it exceeded $1 trillion in assets, more than 3x Apple’s assets. Berkshire doesn’t have the operating margins Apple does, but it has $22 billion in net cash as of June 30.

Buffett likes sports. One never knows. 

Apple vs. the Field

Other possible buyers that didn’t make my list, such as Comcast (CMCSA), owner of NBCUniversal, could be interested. In addition, we can’t forget privately owned businesses that might have an interest. 

But for now, it’s Apple against the world. We’ll all have a front seat to how this plays out. It ought to be very interesting.      

 

On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.