Timeline Strategy Consulting

Is Netflix the Next Apple?

Hey stockdoc06: I suggest that you revisit Apple's efforts to gain control of the living room. They haven't taken off just yet but they will. I think that you are mistaking that Apple ALLOWS use of a small playback device with them REQUIRING use of a small device.

Apple has made a lot of movements toward this with AppleTV, Cinema Displays, using your laptop as a media center, etc. If the content is coming via broadband, I don't know why I would favor anyone from the traditional TV segment, or even Netflix.

It's also hard to call what Apple has done with music a 'mistake'. You may not like it, artists may not like it, labels may not like it - but it speaks for itself with the financial results.


On Jan 19 09:48 AM stockdoc06 wrote:

> Movies are different than music and AAPL does not have nearly the
> advantage they had in music. AAPL's music rise was driven by a highly
> desirable playback device and DRM that forced you to use iTunes to
> buy music for your iPod. With the movement to eliminate DRM music
> will be purchased as a commodity through iTunes, Amazon, WalMart,
> etc where artists will once again be able to control price and demand
> their terms be met, though the iPod device still seems to be the
> preferred playback device for now.
>
> Despite the ability to play movies on a 2" iPod screen, the preferred
> playback device for movies is a TV, a business APPL knows nothing
> about, has no advantage, and it would foolish to try to enter the
> TV business unless they come up with 3D without the glasses. The
> interface may eventually be the TV itself (as LG, I believe, just
> announced) but there are also established 3rd party players already
> (Xbox, playstation, Tivo, Nintendo, Apple, etc) where no one has
> a clear advantage. Netflix has been working to establish relationships
> with as many of these as possible to capture as many TV's as possible.
> So rather than Xbox negotiating with Paramount Studios for distribution
> rights, Netflix does the negotiating and distributes throughout their
> platform. Time will tell if Netlfix manages the relationships well
> enough to make a little for themselves but disuade the 3rd parties
> from going it alone without the Netflix toll road, but I think they
> will learn from Apple's mistake of dictating to artists and consumers
> how the relationship will work.

Is Netflix the Next Apple?

One problem - not insurmountable, but a challenge nonetheless - with this idea is distribution. Everyone in the United States has postal service, but not everyone has broadband with enough capacity to deliver a movie quickly.

If I were Netflix I would figure out a very precise way to understand those broadband demographics, and drive them if possible.

By the way, why can't Apple be the next Apple? As you point out, they understand content, they have an increasing number of videos available over iTunes, and you know that their users generally do have the broadband pipe to get them quickly. And, Apple also has the Apple TV product as a media hub.

I say it's unclear who will win but Apple will be in the mix.