Benedict’s mistake is that he looks at Netflix as someone would evaluate investing in bonds. Comparing the present value of the investment to the future cash stream. He’s only quantifying one side of the equation.
However, an Apple purchase of Netflix is more like a capital investment. What Benedict describes as “halving its value” is only the investment side. The return on that investment are the Android switchers. If Apple were to purchase Netflix and make it exclusive to iOS and immediately lose half of all the subscribers that would be offset by former Android Netflix subscribers switching to iOS. If 2% of all Android users switch to iOS that would be equivalent to an additional $55 billion in gross margin over the next ten years. If 4% of Android users switched to iOS the resulting new gross margin would be about double what Netflix is worth today.
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