By Greg Mills
Things are starting to fall into place on the Apple TV front. Blockbuster filed for bankruptcy, as expected, under great market pressure from NetFlix and RedBox. Apple will seal the doom of Blockbuster by adding one more strong competitor to the mix of TV content providers.
Blockbuster expects to shed about US$900,000 million of debt and leases by going bankrupt. While they will be leaner and meaner, it is far from certain they will survive.
Blockbuster’s biggest problem is that they were way too slow to abandon the business model that had worked for so many years. Putting in brick and mortar stores in every town and lining the shelved with TV and game content in physical form worked for a long time. They rented the titles and had to purchase all the content in vast quantities, distribute and keep a running inventory of all those VCT tapes, DVD disks and game disks. They had to sign leases on the store fronts for period of years and invest hundreds of millions in store front remodeling. They franchised and also had company owned stores.
Then the digital download started with cable TV and satellite providers. Then RedBoxes began to turn up around towns. The RedBox DVD dispensers offered a cheap and easy way to pick up DVD movies for a buck a pop at McDonalds or the like. It is hard to compete with large red refrigerator sized footprints scattered around town renting recent DVDs dirt cheap. Then NetFlix began to rent DVDs through the mail and downloaded over the internet.
Customers began to allow their Blockbuster memberships to expire and obtained digital video content other ways. Too late to save their bacon, Blockbuster began to also stream content. The problem is that the legacy of leased storefronts dragged them down. All across the country are empty Blockbuster stores or desperately failing stores that barely survive. This is the fate of companies that are too content to milk the “go to market” methods of the past and are not nimble enough to make changes required to meet new technology head on.
Apple’s new server farm in South Carolina is being built for a number of reasons, and Apple TV is a heavy hint. While NetFlix is partnering with Apple right now, the history of being too close to Apple indicates one of two results long term. Apple will compete and capture the market or simply buy the partner out and make the entire product Apple’s.
Watch what happens in the next few months. Apple is so loaded with cash they could buy NetFlix easily. I suspect they would be able to convert most NetFlix customers to stay on board as Apple begins to take over the business. The alternative is that Apple simply outgrows NetFlix and takes them over a while downline, when the business has largely been taken over by Apple anyway….
I recently bit the bullet and joined NetFlix. They always ticked me off that they overcame my pop-up blocker more than any other advertiser. I tend to punish bad citizens of the Internet but swallowed my frustration with them and signed up. I have downloaded several movies and played then on both my MacBook Pro and my iPad. They downloaded OK, and I expect my new Apple TV device to arrive any time. I will let you all know how that works out. I am planning to run my Internet cable under the floor to move my cable modem to the space near the HDTV. I will hook up the Wi-Fi server, PlayStation 3 and all that stuff under the TV equipment shelf in the master bedroom.
We have Dish TV and run an additional TV down stairs off one DVR. Dish has worked out well, and the Dish DVR software is head and shoulders better than the TimeWarner Cable DVR box it replaced. I had a terrible experience with DirecTV. I think we all have had bad experiences with all the current video content providers. I look to Apple to make that all better.
My plan is to dump one Dish pay TV channel to pay for my NetFlix account and then use NetFlix download over AppleTV as a movie channel. I will also consider Apple’s TV offerings, but I don’t think I am interested in paying $1 to watch a TV show I can see for free on Dish or pay $5 to see a movie I can see a few months from now on NetFlix.
The path to controlling the living room is going to be a long haul for Apple, but who knows what they will come up with that will wow us? Talk of an Apple HDTV are making the rounds again. I see further development of the Apple TV device as a slam dunk development and won’t hold my breath to see Apple launch an HDTV.
There simply is not enough money in manufacturing TV sets. Have you noticed the price dropping on big TVs lately? Making the Apple TV device more of a DVR is much more likely. That’s Greg’s Bite for today.
(Greg Mills, is a Faux Artist in Kansas City. Formerly a new product R&D man for the paint sundry market, he holds 11 US patents. He’s working on a solar energy startup, www.CottageIndustrySolar.com using a patent pending process of turning waste dual pane glass into thermal solar panels used to heat water. Greg writes for intellectual web sites and Mac related issues. See Greg’s art web site at www.gregmills.info ; His email is firstname.lastname@example.org )