Should Apple buy Netflix or just crush it?

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Should Apple buy Netflix or just crush it?


While Steve Jobs glibly passes the AppleTV device off as a "hobby", he is too smart to have missed the big picture, as broadcast, cable TV and even satellite TV seem to have peaked and are in a slow decline in both customers and revenue. Then you see Blockbuster and countless other smaller video rental places in decline, you have to ask the question, where are the customers going?  DVD disk sales can't be the answer either.  

Digital TV and High Definition TV have made inroads faster than prior TV technology. It was years before VHS penetrated the market and became very common. DVD disks have already peaked and Blu-ray has now begun its reign since it clobbered the other high def. format.  I expect the period Blu-ray is popular to be short, as streaming HD entertainment is going to be the next wave.  The high speed Internet service that is required  to make downloading HDTV programing fast enough to be practical is becoming an expected level or service these days.

Apple normally sees a business opportunity and figures out how to do it better and overcome the user interface issues that consumers hate. Take the cell phone as an example. In the past, even an "Internet ready" cell phone didn't mean the iPhone experience we have today.

About five years ago, while I was still being abused by Sprint, I purchased a cell phone that was
intended to allow me to check my email over the network.  I paid a bit extra for that service but never could get it to work.  I went to a Sprint store and no one there could get the phone to display my email either. What is wrong with this picture?  

That flip phone was a Motorola product and the convention at that time was the problem. No one at any of the cell phone companies or phone manufacturing realized the potential. Remember the Apple cell phone that Motorola put together? You might as well have super glued an iPod to the back of a cell phone for whatever integration you might have. That phone was a flop because something was missing.  The "Apple magic" that divides the user experience as being "Apple" or Microsoft in tone, disappointed users. Apple realized they would have to start from the ground up to make the "iPhone" fulfill the potential of a true "smart phone." 

The ironic issue, is that even when creatively challenged people see the "next big thing," most of them fail to fully understand why it is going to become the standard, until it is already well established. That is where the followers come in. They never really innovate, they just knock off what the leader does and hope to cash in before the technology ages.

Even Bill Gates understood the phenomenon, if not grasping the ability to truly innovate himself, when he said "the company that fails to obsolete its own products will see the  competition do it." Microsoft is proof that timely marketing and blind luck are still a way to make a killing by copying the brilliance of others.  

Apple has already proven that selling digital content on line is big business. The music industry, iPod and the iTunes store tell the story. This is the future of video as well. Then comes the question, it there enough value to Apple to warrant buying Netflix? A large customer base is of value. With a market cap of US$5.31 billion and Apple valued at $242 billion, if Apple wanted to buy Netflix, they likely could.  

I put my money on Apple crushing Netflix through brutal competition using the iTune model and that new server farm being built on the East Coast. Look for a new and better AppleTV device complete with DVR functions to make it both a download device with  storage and also an Apple user interfaced DVR. I expect all this sooner rather than later.

An Apple 3D High Definition TV or box is not out of the question. Keep in mind the new iPad format is just out of the box. How long will it be before it come out with a larger screen that will handle full HD video? The foray of Apple into advertising also tends to support my thoughts that more video digital content distribution from Apple is just around the corner....  

-- Greg Mills

Greg Mills does faux wall art (http://www.gregmills.info/GregMills.info/Home.html) and runs Cottage Industry Solar Shops (http://www.cottageindustrysolar.com/cottageindustrysolar/Home.html).

 

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