i.am.sagar

Apple should buy Netflix one of these days!

I know this will piss off a lot of people - and so be it.  In my opinion, Apple should buy Netflix and call it a day! Why? simply because it makes sense.

Apple is quickly becoming a solid content distributor and they have shown traditional music retailers how the game can be changed.  They are the largest audio retailer today - and that’s no joke.  Now let’s look at the Netflix angle.  Apple sells a set-top box (AppleTV) that currently allows you to buy or rent movies and TV shows.  Imagine if the AppleTV has Netflix integration.  Sure, the business model will have to change a bit on the Apple side because I don’t think anyone is going to pay a monthly fee and also pay to buy content via iTunes.  For most people that have a fast broadband connection and an AppleTV, getting a DVD in the mail makes no sense at all.  Personally, as someone who owns an AppleTV, I much prefer to get all my content on this device if I can.  With an acquisition of Netflix, they can have an online subscription model that, when truly integrated can give MobileMe a very valuable feature.  At the end of the day, we all know what Apple plans to do with their Lala acquisition in terms of streaming music.  Netxflix will give them the same for Movies and TV shows.  They will continue to build out their iBooks store and with so many connected devices like the iPad, iPod Touch/iPhone, Apple TV’s and MacBooks, they’ll have a slew of devices to deliver content on.  Who would be their biggest competitor? Amazon maybe?

Now the obvious question is , why not just offer the same functionality as Nexflix without buying them out?  Clearly AppleTV is not the runaway success that a device like the iPad has been.  In a large part, this is because the AppleTV doesn’t yet address a void and many people don’t know why they would get one.  If Apple can find a way to get a lot more content to consumers on their AppleTV’s, such as instant watch movies or TV shows, a lot of people may be more inclined to dump their Cable TV subscriptions.  The iPad already has a Netflix application so in effect the technology is already there.  Netflix sells the Roku player which has the limitation of being a signel purpose device.  Apple TV has the potential to be a much bigger success given that it can store content locally and can do Music, Movies, Podcasts, YouTube, Photos/Flickr and the link.  Throw in some social networking hooks and let your friends buy you a movie via Facebook.

Apple could also take the current user data that Netflix has and integrate it with their Genius engine to recommend movies, books, and music based on what the user has previously watched.  

Now the way to make this totally Apple would be to eventually phase out the Netflix site and use MobileMe as the portal.  I’m sure they will integrate Lala.com into MobileMe as well.  Use their current portfolio of devices to play the content, and integrate Netflix with iTunes for desktop integration.  Let the mobile devices like iPhones and iPod’s act as remote controls for streaming content.  I think a lot of people will buy the Apple TV if it can deliver the depth of content that people expect to watch these days.  The model has to be economical, and that’s where Netflix rocks.  Now whether they decide to keep the Netflix DVD distribution centers will depend on where they think the future is.  Personally, I think physical media is effectively dead.  A monthly subscription model that lets you consume content as opposed to pay-per-item is the way to go.  At the end of the day, a person can only consume so much at a time, and that’s why Netflix works.  

I don’t think Netflix needs Apple, but I think Apple needs Netflix.  Netflix has a business model that’s clearly working.  Sure they are competing with the likes of Blockbuster and others, but they have a strong brand presence and still enjoy the benefits of being first to market with the model.  Apple enjoys a strong reputation in the online music space, but really it’s just content at the end of the day.  Allowing people to get everything from movies, tv shows, podcases, music and pictures on one device can give them the edge in the battle for the digital hub.  The one think they’ll need to find a way to add is Live content from third-party sources, but I think the device has the capacity to handle it.  Apple should just build or acquire a live streaming service that can fill in the gaps.

Obviously, this is looking at things from the point of view of what’s good for Apple, and not necessarily the consumer.  That being said, consumers will benefit as soon as traditional cable TV outlets realize that they cannot charge ungodly amounts of money from consumers for the limited content that most people actually consume.  Hopefully this leads to competition from the likes of Amazon, Google, and Comcast.  

Apple may end up spreading themselves too thin here also, which is always a risk for a company trying to do too much because it thinks others can’t do it well enough.  To some degree, Apple has been successful in doing many things well.  They are a huge music retailer, a huge consumer electronics retailer, and a very successful Cell Phone manufacturer.  Apple designs and makes their own hardware and also their own operating systems.  They also make a decent list of desktop software for both costumer and prosumer audiences.  While not very successful at it, they are also trying their hand at a cloud presence with MobileMe, and if the past is any reflection of what’s to come, you will see them add a lot to MobileMe to make the offering more appealing to a wider audience (see my earlier comment on the Lala.com acquisition).  Now with the iPad, they are also getting into selling books.  They already sell movies and TV shows on iTunes.  Can a company really do all these things and do them well?  I would say so far Apple is somewhere between a B+ and an A- in my books.  The one thing they have been successful at is making sure their products talk to each other, and in a large part this is because they understand communication protocols that are seamless.  Bonjour is a good example of an implementation that just works.  

Eventually, I see them moving to more of a partner model. Where the App store thrives is the broadness of content.  Same with the iTunes store.  Whether it’s music labels, App developers, book publishers or other media outlets, Apple can offer them a platform that seems to be catching on with consumers.  They may need to give up some control so as to not piss off the partners (like the App store has demonstrated), but having some control to ensure the integrity of the platform has definitely shown that it leads to a stable device.  Instead of being the body that is responsible for approving content, Apple could look to crowdsource this task, or find some third-party that can do it more effectively while not tarnishing Apple’s image.  

At the end of the day, the cloud is where its’ at, and Apple is a bit late to the party.  MobileMe started off with a bloody nose and has since tried to redeem itself, but there just isn’t enough for consumers like myself to drop $100 per year for the service.  On the other hand, I feel like my monthly Netflix subscription is actually well worth the money.  Merge the two, and i’ll likely drink the KoolAid.  Apple has a sizable mobile device market and a growing personal computer presence.  The iPad’s success demonstrates that their products resinate with consumers and the premium price tag isn’t holding everyone back.  Their two questionable ventures are MobileMe and AppleTV - and both can benefit from the NetFlix acquisition.  Maybe my next blog post will be about them buying Vimeo while they’re at it.  And why stop there - Tumblr is so Apple-esque.  Fine, I got carried away there, so let’s wrap it up.

Now off to celebrate Cinco De Mayo with a catfish burrito in Carlsbad, CA!