Apple needs to get serious about video. Here are 3 Hollywood studios it could buy to boost its new streaming service. (AAPL)

Apple CEO Tim Cook

Apple should be in the hunt for a video content company, Wedbush analyst Dan Ives said in a new report.
The company's future growth is dependent on its services business, and a streaming video offering is expected and needed to drive that business, Ives said.
Ives think the company has several potential and notable targets.

Dan Ives thinks the time has come for Apple to open up its wallet and buy a piece of Hollywood.

Like others on Wall Street, Ives, an analyst who covers the iPhone maker for Wedbush, thinks the company's future is in its services business. A key component of that business going forward is likely to be the subscription streaming video offering it's widely expected to launch this year.

But even as Apple is spending more than $1 billion a year to develop new video content, it faces a big challenge going up against Netflix, not to mention the new and upcoming streaming services from Disney and the combined AT&T-Time Warner — it has little in the way of a library of movies and TV shows.

"Now is the time for Apple to rip off the band-aid and finally do significant content [mergers and acquisitions]," Ives said in a new research note. Should the company pass on the opportunity, he continued, "it will be a major strategic mistake ... that will haunt the company for years to come, [because] content [is] the rocket fuel in the services engine that is currently missing in the portfolio."

Read this: Investors focused on Apple's disappointing iPhone sales are missing the company's hidden goldmine

Making such an acquisition would represent a major shift for Apple. While the iPhone maker has purchased lots of smaller companies, it has traditionally eschewed big mergers. To date, the biggest acquisition deal Apple has ever completed was its $3 billion purchase of headphone maker Beats in 2014.

But with some $237 billion in cash and investments as of the end of September, Apple has plenty of money with which to go shopping. And now would be an ideal time, argued Ives. With AT&T having completed its merger with Time Warner last year and Disney expected to close its deal to acquire 21st Century Fox this spring, consolidation is about to become the name of the game in the content business, he said.

While Apple has been trying to build up its content library piece by piece, it risks being left far behind by rivals that are spending many times what it is each year and which already have significant holdings of movies and TV shows, Ives said.

"Apple significantly lacks the core content to get its loyal customer base to pay $10 per month," he said, adding that CEO Tim "Cook, Jony Ive (Chief Design Officer), Eddy Cue (head of Apple's content strategy), and others on the leadership/strategy team continue to drive in the right lane at 55 mph, while competitors from all areas of technology and media are passing the technology stalwart in the left lane driving 100 mph in their new content sports cars."

So where should Apple put its money? What content companies should it buy?

Here are the ones that Ives thinks could be prime targets for Apple:

A24

An independent film distribution and production house, A24 has made a splash in recent years with several acclaimed films, including "Lady Bird" and Jonah Hill's "Mid90s."

The studio has more recently branched into television, distributing last year's "Pod Save America" TV special and the upcoming "At Home with Amy Sedaris."

Lionsgate

A venerable player in the independent film market, Lionsgate hit it big in recent years with some popular franchise films, most notably "The Hunger Games" series. The company also owns the rights to the "Divergent" and "Twilight" series.

The company also has a significant television arm. Among its more notable productions are "Nashville" and Netflix hit "Orange is the New Black."

Sony Pictures

An Apple acquisition of Sony Pictures would be an interesting turn of events. The studio was formed in the late 1980s when that era's dominant electronics firm — Sony — decided it needed to get into the content business and purchased Columbia Pictures from Coca-Cola.

Purchasing Sony Pictures would be among the biggest moves Apple could feasibly make; Sony Pictures is considered to be one of the Big Six Hollywood studios. In addition to films such as the "Spider-Man" series, Sony Pictures has a major television arm, which has produced shows such as "Shark Tank" and "Masters of Sex."

See the rest of the story at Business Insider