Why Apple Will Eventually Kill Netflix

May 20, 2012
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I remember a time when Netflix was special. The company was delivering innovative ideas to the marketplace, it fully understood its customers, and its management was in tune with the changing market dynamics. Netflix was, just last year, in fact, a tech giant.

But after increasing how much it charges customers for access to its rentals and its streaming, and watching its content partners turn their backs on it unless it paid up, everything has changed. Now, Netflix is a shadow of its former self, and a company that, as far as I’m concerned, could very well be on its way to outright obsolescence.

The single thing saving Netflix right now, however, is the fact that it’s not really faced with any tough competition. Vudu is fine, but few people know about it. And although Amazon is trying its own streaming service, it’s not something the company has promoted effectively. At this point, Netflix is still a household name when it comes to streaming.

But before long, that will change. Based on what we’ve seen with Apple over the last several months, it’s becoming increasingly clear that the company is warming to the idea of streaming. And when that happens, expect movies and television shows to accompany it.

Don’t believe me? Let’s first start with the fact that, years ago, Apple bought out Lala’s music-streaming service. Sure, that hasn’t really been used in anything yet, but Apple has been known to pick up companies for the sole purpose of using their technologies years after.

[aquote]Apple's iCloud platform is ripe for streaming content[/aquote]

Moreover, the company’s iCloud platform seems ripe for streaming content. Most people expect it to offer users the chance to stream their own content across multiple products, but what if Apple delivered a Netflix-like offering that includes not only what customers own but also what they don’t?

Out of all of the companies operating in the technology space right now, only Apple has the cash, the infrastructure, and the user base to deliver a solution that could take on Netflix. Even more concerning for Netflix, Apple is the only company with somewhat strong ties with Hollywood studios. The right deal might just get those studios to play ball -- and in the process, hurt Netflix.

We’ve been hearing for years that Apple is a hardware company that wants nothing more than to generate huge profits off of computers, iPhones, and other products. However, in recent years, Apple has warmed to the idea of being more well-rounded, thanks to the launch of its App Store, MobileMe, and yes, iCloud. The days of Apple caring solely about hardware are long gone.

And that alone could be dangerous for Netflix. Apple realizes that today’s consumers want to be entertained, and it understands that cornering the streaming market is a key ingredient in maintaining its control well into the future.

Look for Apple to take aim at Netflix in the coming years. And when it does, expect Netflix to crumble under the pressure.


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