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Summary:

Look back into Apple’s history, and it’s clear it never partners with a company that could one day be a threat. Apple’s decision to include Netflix on the newest Apple TV indicates where Apple may be headed with video and the iTunes store.

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Look back into Apple’s history, and it’s clear that it never partners with a company that could one day be a threat. Mistakes do happen occasionally, and Apple’s pairing with Google did prove to be a bad idea once Google “decided to enter the mobile phone market,” as Steve Jobs put it. Apple’s decision to include Netflix on the newest Apple TV is very telling when trying to anticipate where Apple is going with video and the iTunes store.

Since the iTunes Music Store was announced in 2003 with only 100,000 tracks available for purchase, press and bloggers have been asking, “when will Apple release a subscription model?” Each time a new music service pops up from Microsoft, RealNetworks and Sony, the question is asked again. Jobs repeatedly insists people want to own content, and a subscription plan doesn’t allow for that. The thing is, when he makes a claim like that, it suggests Apple has considered the idea and decided it will never go that route.

If you look back at Jobs’ past quotes about mobile phones, tablets and even cloud services, he shot those ideas down publicly to the point where the person asking feels like an idiot. “The iPod is not a good device for watching video,” he said in 2004, but the iPod Video came out a year later as a “revolutionary way to watch video on the go.” Actions speak louder than words, and in the case of the Netflix partnership, Apple has given us two directions to ponder for the rumored Apple iTunes Subscription Model.

Netflix is a subscription service. You pay a set dollar amount each month, and Netflix mails you a DVD that’s in your queue, as well as providing access to Netflix Instant, which allows anyone with an Internet connection and a computer or gaming device to watch streaming movies any time. The selection of videos available to stream isn’t great, but it’s steadily improving. Over the past two years, Netflix has grown the Instant accessibility by partnering with hardware makers like Sony televisions, Panasonic’s Blu-ray players and Microsoft’s Xbox to make streaming available via gaming devices.

The inclusion of Netflix on Apple’s latest television appliance was a surprise to me, mostly because it shut down any rumors that Apple may one day offer a subscription service. Including Netflix on a web-connected television appliance isn’t a lure for potential buyers, since most of Apple’s potential Apple TV customers have one or more devices in their home capable of using Netflix Instant (computer, iPad, Blu-ray player, Xbox, etc.).

Did Apple add Netflix simply to play catch-up, or was it only Jobs’ way of saying, “Here’s a subscription service. Trust us, we’re not going to do one”? What about movies Apple wants you to rent for 99 cents through iTunes that you can now get through Netflix?

My far-fetched theory is that Apple is keeping an eye on Netflix and how consumers use this subscription model. I’m pretty sure that Apple realizes that the selection of new releases available within Netflix Instant is mediocre, and this is only a strategic partnership to help sell Apple TV to the consumers who prefer to use one device for all television and movie viewing, and Apple fans who don’t mind having four devices that all include the same access.

The day that Apple realizes it’s losing sales to Netflix Instant or it finally sees a viable business model for offering a better subscription service than Netflix, we’ll see this feature yanked from Apple TV. Of course, it’s not like Netflix is a music subscription service. Those rumors about an Apple music subscription service can keep flowing no problem.

The rumors that Apple TV would be getting an App Store treatment excited a lot of people, myself included, because app developers like Netflix and Hulu could easily build apps in the SDK and circumvent Apple’s built-in features. We all know Apple can do whatever it wants with its store, but with both apps available on the iPhone and iPad, Apple shows it doesn’t really care that using these services is just as easy as renting a movie the Apple way.

Apple’s partnership with Netflix indicates the company isn’t interested in the subscription business right now, but as soon as this becomes a priority, you can bet that Netflix won’t be an Apple TV feature anymore.

  1. True Netflix’s instant selection is sparse, but it’s bound to get better.

    I think it’s just that Apple has its sights on offering TV shows and movies almost immediately after they come out and Netflix hasn’t really done much to show they want a piece of that space.

  2. Netflix’s instant selection isn’t that sparse. It’s actually grown by leaps and bounds, and now that they have a deal with a couple major studios, it’s only going to get better.

    However, the Netflix streaming model is different than Apple’s iTunes Store model. Instant streaming from Netflix will never (in its current state) see release-day streaming of titles. It’ll take at least a month or so before new releases will be available that way. Additionally, unless Netflix can nail down some sort of Jesus-contract with all the majors studios out there, there selection will never include *everything*. Just as people with Netflix subscriptions don’t cancel their subscriptions to services like HBO, there’s room for both an iTunes subscription service and Netflix. There’s no reason for Apple to remove Netflix from the Apple TV.

  3. I don’t think Apple will get rid of Netflix from the Apple TV if they decide to do a streaming movie service. It was a natural progression of Netflix on the iPad and then iPhone and foretells the future of apps on Apple TV.

  4. Gee guys, you couldn’t be so WRONG!

    The Studios and TV producers are NEVER going to let Apple get into a position of power like they are with music.

    I am SURE Apple WANTS to offer all these services, but the producers are likely putting a very high price tag on it to make sure other services exist and are competitive. APple is not likely to agree to this unless they can get a DEAL (Like the 99 rentals, then letting Amazon do 99 cent PURCHASE to make that great deal Steve just did seem second rate. Steve probably jumped through hoops to get that. Got he must have been pissed.)

    AppleTV was a hobby as he was trying to get the content model in position. That never happened and never will. Right now Apple is being left behind. Every other BOX has video and better then Apple.
    Apple to get around this has had to push down a Wall in the Walled garden and let Netflix in as it is the only way that content would be able to get in…

    Lets get it straight, and REAL media companies all see Apple is a dangerous, evil competitor that will turn on you if they see fit, and use the zealot following to f-u-up.

    As consumers you may love Apple. As a media business, Apples track record is evil and no company in Media wants anything to do with them.

    Look at Amazon and books history. Again another failing area for the same reasons.

    Netflix is a MASSIVE failure for Apple. Apple wanted to be what they are for music.. for Video.

    Then there is the backflip on the ULA for developers. Again, EU was going to sue them, all big developers where starting to hate Apple for pure evil reasons for the restriction.
    He had to flip on the ULA eventually.

    Then the iPod nano, what a disaster that will be.

    You know its great to see Steve fail, he needs some grounding.

    1. yeah those studios that hate apple are delusional. they may be particular about how they like to do things, but they single handedly saved the music industry. If it weren’t for apple and their 99 cent a track model, we’d all be still stealing stuff using napster.

      You can’t blame Apple for other company’s failures in the online music sales market. All they have to do is cut a deal with the labels (which they apparently are willing to do, even better deals than with apple) and offer a compelling selection/price. They have to market the service well (make it cool/hip) and make it easy to get the music onto portable devices.

      So why does Amazon not do as well as Apple selling music? They don’t market it well and its not that easy to use/get onto portable devices. This is why almost all of Apple’s competitors in the music space have failed… they haven’t made it simple and they haven’t make it “cool”. Its not because people want some magical subscription pricing model that nobody has stumbled upon yet.

  5. If Apple has any kind of monopoly on the sales of digital downloads, it’s because the record labels insisted on DRM.

  6. I want to like NetFlix. But as long as they keep bombarding me with those infuriating popup windows (all over the web), I’ll refrain from looking too deeply at them. I just won’t reward that type of behavior. Sometimes, I worry myself.

    1. I’ve never had a single popup window from Netflix running under Windows 7 or OS X.

  7. This is probably a thought way out there in left field but who knows. Apple has been on a purchasing spree as of late. Maybe they have the thoughts of purchasing netflix at some point?

    I know I know probably way out in left field just a thought or food for thought :-)

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