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Apple should buy Disney to grow the Vision Pro: Analyst

Apple unveiled its new Vision Pro mixed reality headset at the company's WWDC event. It's $3,499 price tag however may turn off a lot of buyers. Laura Martin, Senior Media and Internet Analyst at Needham & Co., however, has an idea. Martin suggests that Apple (AAPL) should buy Disney (DIS) to help build adoption of the new headset. Martin argues that Apple needs "a compelling content storytelling use case" for the Vision Pro to gain traction. She believes that with Disney's content, more people may be willing to purchase the headset.

But what about the Disney parks? Martin says Apple likely won't want the parks, but that those could be spun off or sold, given they are "really a good business, standalone."

Martin also covers Warner Bros Discovery (WBD). When asked about the ousting of CNN CEO Chris Licht, Martin says investors are betting more on WBD leadership than who is leading CNN. She also makes the case for WBD keeping CNN in its portfolio. "The only way to win the streaming wars is you must have entertainment content, and you must have news, and you must have live sports," Martin says, because when news breaks, it drives viewers to your app.

When it comes to the ongoing writers strike and a potential strike from SAG-AFTRA, Martin tells Yahoo Finance Live's Diane King Hall and Alexandra Canal that Wall Street investors will ultimately be the winners because "all of these companies are not going to be able to spend money on content and that won't be a competitive disadvantage."


Key video moments

00:00:21 Why Apple should buy Disney

00:01:19 What to do with Disney Parks

00:02:45 Reaction to CNN CEO stepping down

00:04:42 Who will win from the writers strike

Video transcript

DIANE KING HALL: Apple's new Vision Pro mixed reality headset has been dominating the news this week. Getting pretty mixed reviews so far. But our next guest has an idea that could take the product to the next level. Joining us now is Laura Martin, Needham Senior Media Internet Analyst.

Laura, now, you said in a recent note that Apple buying Disney could boost adoption of the Vision Pro, what's the case for this?

LAURA MARTIN: So the idea is that when, recall when Steve Jobs invented that thing called an iPod that no one had heard of. He put all the music on there, which gave it sort of a use case for consumers to buy the hardware. Similarly, we have a price point here with these massive, like ski goggle looking things of $3,500. I don't think that's going to be a mass product. They need to bring the product down, but they also need sort of a compelling content storytelling use case.

And you can't make Disney storytellers do anything for 100,000 units or 200,000 units. So the only way to help that is to create content that's unique for this particular platform, which is what Apple's trying to create, is to actually own the Walt Disney Company and own the very competent storytellers of Marvel and Star Wars and Disney princesses and Pixar. And then have them make unique content for this new platform called Vision Pro Hi,

ALEXANDRA CANAL: Hi, Laura, Allie Canal here. How do you view Apple though, tackling the park side of the business for Disney, especially since that's so heavily tied to its value? Is that something Apple could possibly want as well?

LAURA MARTIN: I don't think so. I mean, I think you know investment bankers are calling on them. I think that could be spun off into a REIT or sold to a different company. Look, Saudi Arabia seems to be buying things these days. So maybe we sell the parts to Saudi Arabia or one of these big funds.

But the point is, no, I don't think Apple wants the parks. But I think the parks are really a good business stand alone. So private equity or another kind of REIT, kind of real estate buyer would be a logical place for those.

DIANE KING HALL: Laura, I got to ask you, though, about the regulatory landscape for an idea like this. I could see this getting pushed back. What's your thought on that?

LAURA MARTIN: Well, we did have Amazon. It was able to buy MGM for about $10 billion. This would be larger obviously because Disney's trades at over $100 billion. But really, the way the laws are written here, it's not anti-competitive to have a hardware company or let's call it a distribution company own a content company. Remember Comcast bought NBC and a similarly size. They were almost equal size at the time.

So, I mean, to me, it is possible the regulators would try to actually block it. But once you go to court, there are all the precedents allow content to be bought by distribution.

ALEXANDRA CANAL: Laura, I want to switch gears here and talk about Warner Brothers Discovery because we just got the news this morning that Chris Licht is out as CEO of CNN. The stock was little changed immediately following the news. In fact, shares are up more than 3% right now. So what else would have to change in the CNN story for this to affect the stock price, since it seems like, right now at least, investors don't really care?

LAURA MARTIN: You know, I think-- I think-- I think investors who own Warner Brothers Discovery are really betting on David Zaslav, the CEO, and John Malone is the head of strategy on the board. And that's, you know, which is about cost-cutting and figuring out the strategic relevance of news.

And, you know, I think they-- I think investors aren't investing in specific division heads. Really, the two, you know, braintrust at the top need to figure out how to make this work. And so that's why people are buying shares.

ALEXANDRA CANAL: Do you think CNN makes sense in the portfolio of Warner Brothers Discovery? And is it an entity that you think David Zaslav wants to continue to keep?

LAURA MARTIN: I do. I think that the way-- the only way to win the streaming wars is you must have entertainment content and you must have news and you must have live sports. Why? Because the way you drive viewership is when something breaks in the world for news, it drives people to your app. And then you have the option to keep them there with your entertainment content.

But if somebody is watching Netflix and there's suddenly the Ukraine war breaks out with Russia, everybody goes to news for two weeks. So they leave Netflix. So if Warner Brothers Discovery has a great news portal, they stay there. And that is consume entertainment content, which is sort of on the channel where CNN is.

So yes, I think to win the streaming wars, you must own all genres of content in either to attract the next consumer or to retain the next consumer once they're watching your service.

DIANE KING HALL: So, Laura, to your point about content and bringing back Disney back to the forefront of our conversation here, they say content is king. But all of the streamers have an issue in front of them, right? They're dealing with the writer's strike right now. And there is the very real threat of a possible SAG-AFTRA strike as well. What does that do to the content landscape for all of these streamers? Who's the winner in that?

LAURA MARTIN: Wall Street, investors because what's going to happen is all of these companies are not going to be able to spend money on content and that won't be a competitive disadvantage. The streamers have been in an arms race throwing money at new content. The more of these guilds that go on strike, the longer these companies are not going to spend any money on content.

Guess what happens to their reported earnings per share and their profitability. And they don't have to worry about competing with each other because no one has new content. So this is going to be great for investors and for the earnings per share and free cash flow. It's not a long-term solution because ultimately you need these guilds to go back to work. But in the near term, I expect earnings outperformance for the next 12 months.

DIANE KING HALL: We will certainly see what happens with SAG-AFTRA already voting to approve a strike. So they're in the beginning of negotiations. We'll see how that turns out. Laura Martin, Needham Senior Media and Internet Analyst, our very on Allie Canal as well. Thank you so much to both of you.