Blog Post

More Proof Apple TV Is Actually a Netflix Box

Apple (s aapl) has indeed crossed the 1 million Apple TVs sold mark, as it predicted it would shortly before Christmas. I argued that its relative success was mostly due to Neftlix (s nflx) being available on the streaming media device, and a new report from an industry analyst (via AppleInsider) supports that view.

Gleacher & Company’s Brian Marshall said Dec. 29 that according to his estimates, sourced from company reports and additional research, Apple rents around 475,000 movies and TV shows per day through the iTunes store. Netflix, by comparison, rents over 10 times as much, with about 5.1 million rentals per day.

But Apple and Netflix have very different models. Netflix offers a “pay once, watch as much as you can” model, while Apple embraces a fee-per-download way of doing things. Maybe Apple is more successful from a revenue perspective, despite the large discrepancy in daily rentals? Not so, according to Marshall.

According to his estimates, iTunes rentals bring in around $60 million per quarter, while purchases through the media distribution service account for around $50 million, making for a total of approximately $110 million per quarter. Netflix’s reported revenue for just a single month (Sept. 2010) is about $550 million, or five times as much.

It’s by no means bad news for Apple, which is still growing its iTunes rental business. Marshall believes iTunes rental revenue could exceed $1 billion per year within five years, giving it another fairly healthy revenue stream, even after giving movie studios their cut.

The bottom line remains that Netflix has far more traction than iTunes as a means for renting and viewing streamed content, so it’s hard to underestimate its effect on Apple TV sales. Anecdotally, it’s the only thing anyone I know who has one uses it for, and almost none of those I know who bought this model owned a previous generation device.

So is Apple TV just a great Netflix box, or is something else driving sales? The impending potential of apps, maybe?

Related content from GigaOM Pro (sub req’d):


14 Responses to “More Proof Apple TV Is Actually a Netflix Box”

  1. How is this proof? The AppleTV isn’t just for purchasing from the iTunes store, it offers other functions. Comparing the revenue of one service offered on a device to the revenue of another service doesn’t tell much when the device does other things. To get a better idea, you would have to know the exact amount of streaming people do from their local network, from the free internet radio stations, YouTube, trailers, and the iTunes store, and anything I might be missing, then compare that to Netflix. That wouldn’t even give a real estimation because Netflix isn’t solely used for streaming to an AppleTV. That $550 million figure also includes people who don’t even use Netflix for streaming, and the 15 million-plus subscribers who don’t own an AppleTV.

    It’s like saying that toilets are actually just chairs for reading, because book and magazine sales are higher than toilet paper sales.

  2. I bought AppleTV because it is the best NetFlix box but only after the AirPlay feature appeared.

    Because my broadband speed is stuck at 1.5 Mbps, I download any rentals to my computer first and then stream them to Apple TV. Works pretty well and the quality is great.

    Streaming directly to the AppleTV at 1.5 Mbps makes it basically unusable. It would be nice if it buffered and cached the file since I DVR and watch things hours or days after they are recorded on my Cable TV.

    NetFlix works very well but at a notably lesser than standard definition quality.

  3. My cable connexion is roughly 3.25 mbps, so streaming via either Netflix or Hulu can sometimes be pretty choppy, especially in scenes with a lot of motion, e.g., Glee dance routines. Furthermore, Netflix streaming is often presented in a “Pan & Scan” letterbox instead of the original aspect ratio, and of course it lacks any of the extras found on DVD / Blu-Ray. For these reasons, I’ll keep renting movies via mail & watching on big screen, & watching TV on my laptop (at least the choppy video isn’t as annoying on the smaller screen).

  4. I work for a small Apple authorized reseller in Europe. We could have sold MUCH more Apple TV than we actually did if only we would have had enough supplied. The black box was sold out for 5 weeks solid, and the distributors were unable to get any new ones. The days before Christmas, we routinely answered the phone with “Hi there, here’s Michael from maXXolution. No, we don’t have Apple TV on stock.” The demand for Apple TV even increased the demand for the iPhone 4 – and was similar to the demand of the iPhone 4 at launch time.

    Now to answer your question: we don’t even GET Netflix over here, so the argument you make falls flat. People over here want the Apple TV as a conveneint way to stream their movies from a Mac, to watch photos and – yes – the buyers are very confident and certain that they will be able to use apps on the device in 2011.

  5. Apple TV without streaming Netflix would have been a deal breaker for me considering my TV already had a Wii and PS3 hooked up to it which are both equipped with a flashy Netflix App. The idea was to have one device that does everything and unfortunately Sony, and Apple have walled gardens for their content so I picked the Apple Garden because it had more to offer and sycs with all of my devices. Sony has a smaller content garden and their device interplay is lacking, Nintendo lacks a garden completely.

    Right now I purchase season passes on iTunes for shows that I feel are absolutely must haves and will get multiple viewings. Aside from that I use Netflix to fill in the gaps and never rent from iTunes. In rare cases I rent a movie, but I prefer to get a Blu-Ray in the Mail from Netflix if its available. I guess I should mention I canceled my cable subscription and could not be happier. In the end I’m saving money and never have to view commercials, I also end up growing my content library which is a nice bonus.

    iTunes moving to an all you can consume model for a fixed price sounds interesting, but it all comes down to the deals they can cut with the studios and right now Apple is having a tough time doing that for a Pay-per-view basis let all one an all you can eat model.

    • Hi Josheph,

      Canceling my cable subscription. That sounds great! Unfortunately we don’t have iTunes movie rentals, iTunes TV shows nor Netflix here in Holland. As soon as we get at least two of those, I’ll be canceling my cable subscription and buying an Apple TV!


  6. AlleyGator

    Personally, I took a chance on an AppleTV just because it was priced low and I wanted to play around with a new toy, watch movie trailers/YouTube/airplay. I have yet to rent my first movie from it, and I didn’t have netflix at the time.

    But I did get to hook up the AppleTV to Netflix over the holiday season, and I’d rate it as my best Netflix experience ever. So yeah, I’d agree with everything you’ve said here. However, I’d also like to make a prediction: Hulu is coming soon, or else Apple doesn’t know what’s good for them.

  7. Supporting Netflix is a short-term strategy for getting AppleTV into more people’s homes faster.

    Apple will eventually roll-out its own “all you can eat” buffet. It will be better than Netflix, and people will cancel their Netflix subscriptions and continue to user their existing AppleTVs, with upgraded capabilities/libraries.

    • I think that you are right. And I think that Apple’s subscription service would really kick ass. As the owner of an Apple TV and Netflix subscriber, there are a lot of things I wish were better. I hope that Apple can do it right.

    • Another Zookeeper

      I won’t be canceling Netflix anytime soon. There’s too much content that is not in iTunes for me. Subscription plan alone won’t change my avoiding iTunes for media consumption.

  8. Although I am excited that Apple TV added Itunes it makes little difference to me because I owned a Roku box to. The big thing to me is airplay, because I use my computer as a DVR and can now stream directly to the TV from my laptop without have to connect the computer directly. Airplay is the #1 reason I bought the Apple TV