stockdoc06

Is Netflix the Next Apple?

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.