Why Apple Buddies Up to Frenemy Netflix

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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.

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