President-elect Donald Trump's plans to slash corporate tax rates and repatriate overseas cash should spur a flurry of M&A activity in the media industry this year, with Apple (AAPL - Get Report) potentially leading the charge, BTIG analyst Rich Greenfield predicted in a Tuesday note. Over-the-top content platforms will continue to threaten linear TV programming as they increasingly penetrate global markets, while the rise of multichannel streaming services will grab even more share from traditional pay-TV services, Greenfield wrote. Together, these factors will also catalyze consolidation in the media market, he added.
A slate of companies including Spotify, MGM (MGMB) , T-Mobile (TMUS - Get Report) , Pandora (P) and Epix may all be acquired in 2017, Greenfield wrote. Netflix (NFLX - Get Report) , however, will not be sold to another media company, despite analysts clamoring for a deal in 2016, he predicted.
"As much as we believe Disney (DIS - Get Report) could solve its direct access to consumer problem by buying Netflix, we do not believe Disney's Board of Directors and management have the courage to undertake such a large, transformative transaction," Greenfield explained. "A Netflix acquisition would be far too dilutive for telcos such as AT&T (T - Get Report) or Verizon (VZ - Get Report) and too large for the remaining major media companies."
But Apple could be a logical buyer of Netflix at some point, Greenfield reasoned, as it could expand the technology giant's presence beyond the App Store and "now fading" iTunes.
Apple could also make a move for Spotify, the popular music streaming service that's become a hot prospect for an initial public offering in 2017. Spotify could build upon its 45 million-plus subscriber network by adding video content, making it all the more attractive to potential buyers such as Disney, which is rumored to be shopping for a deal as CEO Bob Iger gets closer to exiting the company in 2018, Greenfield noted.
Netflix CEO Reed Hastings may be laughing all the way to the bank this year.
And AT&T isn't likely to go quiet after cementing its blockbuster $85.4 billion deal with Time Warner (TWX) , Greenfield said. The telecommunications company could swallow up MGM as a means of beefing up Time Warner's content library, particularly with unscripted TV production and access to the James Bond film franchise.
The planned AT&T/Time Warner merger should also push Comcast to pursue its own mega deal, possibly with T-Mobile or Epix. Through its acquisition of DirecTV, AT&T eclipsed Comcast as the largest multi-channel video programming distributor in the country. Now, Comcast will likely be looking to catch up, Greenfield noted.
"We believe Comcast has to be thinking seriously about T-Mobile, especially given the renewed potential of a Sprint (S - Get Report) /T-Mobile merger in light of President-elect Trump," Greenfield explained. "A national wireless platform would allow Comcast to compete more directly head-to-head with AT&T, as well as make a national rollout of Xfinity as a vMVPD [virtual multichannel video programming distributor] more rational."
To compete with AT&T's acquisition of HBO (rolled into the Time Warner deal), Comcast could acquire Epix, since Comcast doesn't also have its own subscription video-on-demand service.