But just because the Disney CEO might think such a deal could have happened doesn’t mean it actually would have transpired – even with the backing of two strong-willed personalities in Iger and Jobs.
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A merger of Apple and Disney would have required the approval of the boards and shareholders of both companies (as well as regulatory clearances). It would have been bet-the-company propositions that would have been very high hurdles to clear, notwithstanding the fact that Jobs was Disney’s single largest shareholder, with a 7.4% stake in Disney after selling Pixar.
Wall Street has speculated about Apple buying Disney, weighing the pros and the cons. In 2017, RBC Capital Markets analysts sketched out how a deal could be feasible. Among the perceived benefits: A combined Apple-Disney would create an instant competitor to Netflix, by letting the Mouse House pump its content into Apple’s huge base of iPhone customers.
But the odds of a Disney-Apple combo were low, RBC cautioned. Among the risks: It would have required Apple to deviate from its business strategy, presenting potential conflicts with Apple’s other media partners. Combining the companies would present integration pitfalls. And buying Disney would be a signal to Apple investors that the iPhone business was peaking — although that has, in fact, come to pass and driven Apple to try to diversify with new services including the forthcoming Apple TV Plus streaming service.
Moreover, it would have required a huge chunk of change, north of $200 billion (cash that Apple would have needed to reclaim from overseas holdings, with a potential U.S. tax hit making an all-cash Disney buy impossible).
Apple has shied away from mega-deals, although it reportedly met with Time Warner execs in late 2015 in a discussion that floated a potential acquisition (prior to AT&T’s bid). The Cupertino tech giant’s biggest M&A transaction to date has been its $3 billion acquisition in 2014 of Dr. Dre and Jimmy Iovine’s Beats Electronics, the maker of headphones and speakers and music-streaming service.
Recall that Steve Jobs, for all the hagiography about him as a visionary, had once famously declared that no one would buy a music subscription. “The subscription model of buying music is bankrupt,” he told Rolling Stone in a 2003 interview. “I think you could make available the Second Coming in a subscription model and it might not be successful.” Apple’s lack of a music-subscription service, until the Beats acquisition, had left it behind rivals like Spotify.
Meanwhile, the poor track record of big tech/media tie-ups would have given both Apple and Disney boards serious pause. Exhibit A here is AOL’s ill-fated $165 billion acquisition of Time Warner in 2000, which was rooted in the premise of combining digital distribution with traditional media. AOL Time Warner of course was later unwound, and it’s gone down in history as one of the worst corporate mergers to date. More recently, AT&T has gotten pushback from an activist investor raising questions about the benefits of its $85 billion Time Warner takeover.
Historically, Disney’s board has been risk-averse when it comes to M&A. In his book excerpt, Iger acknowledges that he faced resistance from Disney’s board about the Pixar deal in 2006 – which at $7.4 billion was a far less risky bet than any proposed deal to merge Disney and Apple would have been.
“In my first board meeting as CEO, I explained that it was imperative for me to figure out how to turn Disney Animation around,” Iger recalls. When he proposed buying Pixar, “The board was somewhat incredulous when I raised this idea at the very beginning of my tenure as CEO, but they were intrigued enough to allow me to explore it, perhaps because it seemed so far-fetched.”
Iger admits to realizing the $7.4 billion price tag for Pixar would be a “tough sell to our board and to investors.” Board members objected that there were “too many risks”; that it would be too expensive; and “Many people thought Steve would be impossible to deal with and would try to run the company.” Ultimately, the board voted 9-2 in favor of the Pixar deal.
Certainly, Iger has a strong deal-making record, on balance. After Pixar, he went on to buy Marvel and Lucasfilm, both of which have paid dividends for Disney. His $675 million acquisition of YouTube multichannel network Maker Studios, by comparison, has been a bust. In any case, it’s far from clear Iger could have successfully made the case for Disney-Apple, given the potential downsides.
One other point: Iger’s comment about a might-have-been Apple-Disney combo is in the context of him expressing sadness over his friend’s death. Here’s the full paragraph about that: “With every success the company has had since Steve’s death, there’s always a moment in the midst of my excitement when I think, I wish Steve could be here for this. It’s impossible not to have the conversation with him in my head that I wish I could be having in real life. More than that, I believe that if Steve were still alive, we would have combined our companies, or at least discussed the possibility very seriously.”
Is Iger here mainly wishing he and Jobs could have built something bigger — and more amazing — in the media and technology industries than anyone had ever seen before?
The strong personal bond between the two friends and business partners seems undeniable. “Our connection was much more than a business relationship. We enjoyed each other’s company immensely, and we felt we could say anything to each other, that our friendship was strong enough that it was never threatened by candor,” Iger writes of Jobs. But we’ll never know if that would have been enough to unite their two companies.
Pictured above: Bob Iger and Steve Jobs in 2006