Will iTunes go the Netflix route?

[Steedeel]

Hi, seeing as the music industry looks like it's going subscription streaming in future, is there a real possibility Apple will offer a subscription streaming service if the sell-through video market collapses? They won't want to be playing catch up.

[AZBrowncoat]

Apple certainly has everything in place to offer such a service - the only thing would be the licensing arrangements and we've seen the issues that Netflix and Amazon have had with acquiring and retaining streaming rights to content owned by the studios.

[Steedeel]

Originally Posted by AZBrowncoat

Apple certainly has everything in place to offer such a service - the only thing would be the licensing arrangements and we've seen the issues that Netflix and Amazon have had with acquiring and retaining streaming rights to content owned by the studios.

I'm a bluray fanatic but I do use itunes for some rentals and I tend to use them exclusively. It would certainly be a battle royale if they went up against Netflix lol.

[sodapop]

It is very unlikely that Apple would pursue the video subscription market but I wouldn't rule it out. As for the sell-through video market collapsing, there is absolutely no way that is going to happen. Did the introduction of all you can eat restaurant buffets destroy the traditional restaurant menu? Did people suddenly stop buying records once the radio was invented? Or was that the other way around? The fact of the matter is buying, renting and subscribing all complement each other and they each cater to a specific market segment.

[Steedeel]

Originally Posted by sodapop

It is very unlikely that Apple would pursue the video subscription market but I wouldn't rule it out. As for the sell-through video market collapsing, there is absolutely no way that is going to happen. Did the introduction of all you can eat restaurant buffets destroy the traditional restaurant menu? Did people suddenly stop buying records once the radio was invented? Or was that the other way around? The fact of the matter is buying, renting and subscribing all complement each other and they each cater to a specific market segment.

Look at the music industry. Streaming is growing rapidly while downloads are in decline.

[Zu Nim]

Licensing for music is different than film. There are compulsory licenses for music that is outside the listener's control (radio) and the industry seems to include their very latest music as part of their non-compulsory deals (no windows). Film subscription services don't generally include the latest movies, those remain in the VOD/purchase arena. I don't see any major studio moving away from that any time soon. It's hard enough getting them to move the VOD/purchase window closer to the theatrical release date. TV is a different landscape. Unfortunately none of those numbers are broken out.

But in the face of collapsing demand, Apple won't stick with sell-through on principle. They also won't be leading the pack into video subscriptions. Somewhere in the middle, which is fairly typical.

[HockeySlasher]

Originally Posted by Steedeel

Hi, seeing as the music industry looks like it's going subscription streaming in future, is there a real possibility Apple will offer a subscription streaming service if the sell-through video market collapses? They won't want to be playing catch up.

If that is the case, I think Apple would make a strong push to purchase Netflix.

[Zu Nim]

Pretend Netflix's trailing P/E is reasonable and not over 100. Its market cap is nearly $27B...let's say 50% premium to get shareholder approval...that's $40B. That would be an order of magnitude larger than the Beats purchase, which was already the largest purchase Apple has ever made. So no, I don't think they'd be pushing to purchase Netflix unless Netflix undergoes traumatic compression of its multiple.

[Steedeel]

I think apple needs to improve their download/stream waiting times. I have a Apple TV and even with fibre I sometimes have to wait five minutes to watch a rental. It's not like the picture is any better than Netflix either. On the odd occasion I rent instead of buy blurays i want instant playback.

[sodapop]

Originally Posted by Steedeel

I think apple needs to improve their download/stream waiting times. I have a Apple TV and even with fibre I sometimes have to wait five minutes to watch a rental. It's not like the picture is any better than Netflix either. On the odd occasion I rent instead of buy blurays i want instant playback.

Well, that's work in progress but it could also be related to the Apple TV not detecting that it has downloaded a sufficient amount of data to start the movie. If you're waiting more than a minute for the movie to start, you should hit rewind and then press play again. For me, it usually only takes about 15 to 30 seconds for the movie to start playing but occasionally, the Apple TV gets lost in la la land and you have to force it to start playing.

http://arstechnica.com/information-t...on-to-comcast/

[Steedeel]

Originally Posted by sodapop

Well, that's work in progress but it could also be related to the Apple TV not detecting that it has downloaded a sufficient amount of data to start the movie. If you're waiting more than a minute for the movie to start, you should hit rewind and then press play again. For me, it usually only takes about 15 to 30 seconds for the movie to start playing but occasionally, the Apple TV gets lost in la la land and you have to force it to start playing.

http://arstechnica.com/information-t...on-to-comcast/

Thanks.

[HockeySlasher]

Originally Posted by Zu Nim

Pretend Netflix's trailing P/E is reasonable and not over 100. Its market cap is nearly $27B...let's say 50% premium to get shareholder approval...that's $40B. That would be an order of magnitude larger than the Beats purchase, which was already the largest purchase Apple has ever made. So no, I don't think they'd be pushing to purchase Netflix unless Netflix undergoes traumatic compression of its multiple.

Understood... but if Apple wants/needs to get into the streaming services, how much money would it cost to start up? They'd have to pump in a TON of money just to get off the ground, then to be able to compete?

This kinda already played out on a smaller scale - Maps. Apple decided to make its own map - opposed to using Google - and well, the results weren't the best. Google, like Netflix, have had YEARS to start/tweak/improve their services.

If Apple were to get into the game of streaming/subscription based, purchasing Netflix makes more sense than to build new. Netflix has existing contracts with providers (which Apple seems to be always struggling with) and Netflix has the infrastructure.

Plus, Apple has what, 160-180 billion in cash in their war chest?

Its a hefty price to pay, but I think Tim Cook and the rest of the Board would opt to see if Netflix could be purchased.

[Zu Nim]

It would cost tens of billions less to roll their own. Netflix only spends about $2B/year licensing shows, and all those agreements would go up in smoke if it was purchased. (The content companies seem to like to make agreements like that.)

You could argue that with 50M subscribers, $40B means you'd be acquiring each subscriber for $800. That's over 8 years of monthly fees until a subscriber pays off their acquisition costs. Apple could offer much less in incentives to get new subscribers to switch especially since they probably have relationships with many of those customers.

And Apple's banked billions aren't very relevant. They'd have to repatriate a lot of it.

Maps had a rough start (an understatement) but that was a tech problem. A subscription service isn't a tech problem.

[Andysol]

Originally Posted by HockeySlasher

Understood... but if Apple wants/needs to get into the streaming services, how much money would it cost to start up? They'd have to pump in a TON of money just to get off the ground, then to be able to compete?

This kinda already played out on a smaller scale - Maps. Apple decided to make its own map - opposed to using Google - and well, the results weren't the best. Google, like Netflix, have had YEARS to start/tweak/improve their services.

If Apple were to get into the game of streaming/subscription based, purchasing Netflix makes more sense than to build new. Netflix has existing contracts with providers (which Apple seems to be always struggling with) and Netflix has the infrastructure.

Plus, Apple has what, 160-180 billion in cash in their war chest?

Its a hefty price to pay, but I think Tim Cook and the rest of the Board would opt to see if Netflix could be purchased.

I forget the exact number- but over $100 billion of that 160-180 is overseas and can't be used to purchase a US company.

What if Apple thinks Netflix's model is not as profitable as it should be, and they have a better long-term plan? Say- a subscription based a la carte cable model.

Not saying any of that will happen, but I can tell you what they won't do. Spend half their US $ on Netflix. If they didn't buy them back in 2012, they certainly aren't going to buy them now.

To add an immense level of confusion- something we have no idea about- is if the studio deals that Netflix has are transferrable. Almost all music streaming companies' deals are non-transferable. Apple lost all contracts with Beats music when they purchased beats. We assume they were resigned- or at least integrated into their existing iTunes Music- but we aren't privy to the terms. Better? Worse? Who knows. Even losing the contract is mostly rumor with no confirmation.


It's way more complicated than us armchair quarterbacks can figure out


Edit: Just saw Zu reiterated a lot of what I said. Great minds....

[Andysol]

Originally Posted by Zu Nim

It would cost tens of billions less to roll their own. Netflix only spends about $2B/year licensing shows, and all those agreements would go up in smoke if it was purchased. (The content companies seem to like to make agreements like that.)

You could argue that with 50M subscribers, $40B means you'd be acquiring each subscriber for $800. That's over 8 years of monthly fees until a subscriber pays off their acquisition costs. Apple could offer much less in incentives to get new subscribers to switch especially since they probably have relationships with many of those customers.

There are lots of things Apple could do to start competing product lines- but those are relatively unsuccessful in most cases where an acquisition could have made them more successful. Ping, iTunes Music hasn't taken off like we'd thought. Both of those could have arguably had acquisitions to help them.
Maps wasn't really fair because who were they supposed to buy? Mapquest? They had to start that from the ground up.

With Beats, theyve clearly turned away from that- at least on that case. So an acquisition could be down the road for something that is already mainstream. But no way it would be Netflix at the current price.

[HockeySlasher]

Originally Posted by Andysol

I forget the exact number- but over $100 billion of that 160-180 is overseas and can't be used to purchase a US company.

What if Apple thinks Netflix's model is not as profitable as it should be, and they have a better long-term plan? Say- a subscription based a la carte cable model.

Not saying any of that will happen, but I can tell you what they won't do. Spend half their US $ on Netflix. If they didn't buy them back in 2012, they certainly aren't going to buy them now.

To add an immense level of confusion- something we have no idea about- is if the studio deals that Netflix has are transferrable. Almost all music streaming companies' deals are non-transferable. Apple lost all contracts with Beats music when they purchased beats. We assume they were resigned- or at least integrated into their existing iTunes Music- but we aren't privy to the terms. Better? Worse? Who knows. Even losing the contract is mostly rumor with no confirmation.


It's way more complicated than us armchair quarterbacks can figure out


Edit: Just saw Zu reiterated a lot of what I said. Great minds....

Originally Posted by Andysol

There are lots of things Apple could do to start competing product lines- but those are relatively unsuccessful in most cases where an acquisition could have made them more successful. Ping, iTunes Music hasn't taken off like we'd thought. Both of those could have arguably had acquisitions to help them.
Maps wasn't really fair because who were they supposed to buy? Mapquest? They had to start that from the ground up.

With Beats, theyve clearly turned away from that- at least on that case. So an acquisition could be down the road for something that is already mainstream. But no way it would be Netflix at the current price.

I totally get everything you're saying... I'm just shooting from the hip, so to speak.

I just think that Apple would have to purchase a company to really get into the streaming movie/TV show landscape.

*I withhold the right to rescind this statement if/when the new Apple TV comes out and has some sort of WOWness that blows the market wide open.

[Andysol]

Originally Posted by HockeySlasher

I totally get everything you're saying... I'm just shooting from the hip, so to speak.

I just think that Apple would have to purchase a company to really get into the streaming movie/TV show landscape.

*I withhold the right to rescind this statement if/when the new Apple TV comes out and has some sort of WOWness that blows the market wide open.

I wish they would already. Heck- I'd settle for an App Store at this point.

[Walter-S_NC]

Originally Posted by Andysol

I wish they would already. Heck- I'd settle for an App Store at this point.

IMHO, Apple stands able to kill the PC with AppleTV. Just add a bluetooth keyboard and productivity apps that are commonly found on computers.

Then everyone will have a reliable computer in the set top box price range.

To do so, they would need to shoot their own PC business in the foot though.

I do think it is likely they start to add subscription, like Prime/AIV.

[Andysol]

Originally Posted by Walter-S_NC

IMHO, Apple stands able to kill the PC with AppleTV. Just add a bluetooth keyboard and productivity apps that are commonly found on computers.

Then everyone will have a reliable computer in the set top box price range.

To do so, they would need to shoot their own PC business in the foot though.

I do think it is likely they start to add subscription, like Prime/AIV.

Who wants to browse the Internet on their TV? That didn't work 15 years ago and it's still dumb.

The iPad and tablet has damaged and will eventually kill the PC except for professional use.

The Apple TV won't have any impact on The PC market.

[Steedeel]

Originally Posted by Andysol

Who wants to browse the Internet on their TV? That didn't work 15 years ago and it's still dumb.

The iPad and tablet has damaged and will eventually kill the PC except for professional use.

The Apple TV won't have any impact on The PC market.

Disagree with you there mate. Tablets are already slowing sales wise, long before the industry expected them too IMO. It seems to be phablets that have the momentum and sadly, smartphones.