It sounds like Apple’s Jimmy Iovine has let the cat out of the bag regarding Apple’s (AAPL) desire to get into original content. That’s great but I’ve been having a hard time coming up with reasons why Apple shouldn’t just buy Netflix. Outside of the $60 billion price tag anyway.
As I’d written earlier, now that the smartphone gold rush is over, it’s going to be all about stealing market share going forward. I find the recent rumors about Apple’s push into exclusive content encouraging. It shows that Apple understands how powerful that exclusive content can be.
So now the question become how fast should Apple move? Is there an urgency to expanding into content or can Apple afford to take their time?
In the bricks-n-mortar retail world, when a company is debating whether to build out their own network of stores or purchase an established competitor, the deciding factor is typically the urgency. It’s cheaper to build your own stores and is less risky if you can avoid getting deep into debt. But would this allow a competitor to beat you into all the desirable cities? If the CEO thinks that there isn’t time to build its own network ,they may decide to buy smaller regional chains. This gives you an immediate presence where you want to be and allows you to beat your competition into those cities.
In the digital media world, everyone has been getting into original content for the past few years. Apple has not. Even now, the rumors suggest that Apple doesn’t intend to take on Netflix and Hulu in a head-on assault. Apple only wants to augment their offerings with a few gold nuggets.
I think it would be a mistake for Apple to only slowly dip their toe into the water. They should jump in and buy Netflix and Hulu. Disney too if they could afford it.
I wonder how many cord cutters subscribe to both Spotify and Netflix? What do you think would happen if Apple purchased Netflix and made it a part of Apple Music? I’m sure a large number of people would find it hard to pay for two music services and would decide to cancel Spotify since they would love the idea of getting Netflix for free.
Or how many cord cutters subscribe to both Netflix and Hulu? Can you imagine how happy this crowd would be if Apple combined them under one umbrella? A large number of these subscribers would love to pay only one fee for Apple Music and get both.
After Apple purchases both Hulu and Netflix, the next step would be to drop support for Android phones. But only after a huge number of Android users had gotten a taste of the media smorgasbord that Apple Music had become.
Making Apple Music available to Android was a tactical mistake. It was a decision that prioritized service revenue above device revenue. This was directly in contradiction with the decision to offer iTunes on Windows. That decision was made because Apple placed iPod device revenue above any other concerns. The intent was still to reap device revenue, only from a new crowd.
If Apple were to purchase Netflix, Hulu, and Disney and make it all available for $20 per month it would be a cord cutter's dream. The TV app would be on the road to becoming the low-cost media option that they envisioned. Apple doesn’t need the networks to play ball. They can play the part of Braveheart and consolidate all the rebels who are upending the media status quo.
From a financial perspective, investors aren’t always too crazy about a company keeping a huge cash cushion. If an investor wanted to keep money in the bank, he could do that himself, with less risk. No, they want a good management team to put that money to use. In Apple’s case, putting that money to use to further expand the iPhone’s market share would be a prudent move. And doing it in a way that minimizes Apple stretching itself too thin would be very attractive. Purchasing Netflix’s management team would take some of the load off of Tim Cook’s team.
So now the question become how fast should Apple move? Is there an urgency to expanding into content or can Apple afford to take their time?
In the bricks-n-mortar retail world, when a company is debating whether to build out their own network of stores or purchase an established competitor, the deciding factor is typically the urgency. It’s cheaper to build your own stores and is less risky if you can avoid getting deep into debt. But would this allow a competitor to beat you into all the desirable cities? If the CEO thinks that there isn’t time to build its own network ,they may decide to buy smaller regional chains. This gives you an immediate presence where you want to be and allows you to beat your competition into those cities.
In the digital media world, everyone has been getting into original content for the past few years. Apple has not. Even now, the rumors suggest that Apple doesn’t intend to take on Netflix and Hulu in a head-on assault. Apple only wants to augment their offerings with a few gold nuggets.
I think it would be a mistake for Apple to only slowly dip their toe into the water. They should jump in and buy Netflix and Hulu. Disney too if they could afford it.
I wonder how many cord cutters subscribe to both Spotify and Netflix? What do you think would happen if Apple purchased Netflix and made it a part of Apple Music? I’m sure a large number of people would find it hard to pay for two music services and would decide to cancel Spotify since they would love the idea of getting Netflix for free.
Or how many cord cutters subscribe to both Netflix and Hulu? Can you imagine how happy this crowd would be if Apple combined them under one umbrella? A large number of these subscribers would love to pay only one fee for Apple Music and get both.
After Apple purchases both Hulu and Netflix, the next step would be to drop support for Android phones. But only after a huge number of Android users had gotten a taste of the media smorgasbord that Apple Music had become.
Making Apple Music available to Android was a tactical mistake. It was a decision that prioritized service revenue above device revenue. This was directly in contradiction with the decision to offer iTunes on Windows. That decision was made because Apple placed iPod device revenue above any other concerns. The intent was still to reap device revenue, only from a new crowd.
If Apple were to purchase Netflix, Hulu, and Disney and make it all available for $20 per month it would be a cord cutter's dream. The TV app would be on the road to becoming the low-cost media option that they envisioned. Apple doesn’t need the networks to play ball. They can play the part of Braveheart and consolidate all the rebels who are upending the media status quo.
From a financial perspective, investors aren’t always too crazy about a company keeping a huge cash cushion. If an investor wanted to keep money in the bank, he could do that himself, with less risk. No, they want a good management team to put that money to use. In Apple’s case, putting that money to use to further expand the iPhone’s market share would be a prudent move. And doing it in a way that minimizes Apple stretching itself too thin would be very attractive. Purchasing Netflix’s management team would take some of the load off of Tim Cook’s team.
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