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Will Netflix Take a Bite Out of Apple?

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Netflix (Nasdaq: NFLX  ) may finally be ready to warm up to smartphone owners as streamers of online video.

Hacking Netflix has spotted a customer survey Netflix is using to gauge subscriber interest in a streaming app for Apple (Nasdaq: AAPL  ) iPhone users. Because it would only work through Wi-Fi -- sorry, 3G nomads -- one would assume that it would also be available on Apple's iPod touch.

"Imagine that Netflix offers its subscribers the ability to instantly watch movies & TV episodes on their iPhone," the survey begins, ultimately asking how likely the subscriber would be to use it.

The survey is a surprise, because Netflix has neglected the growing millions of iPhone owners in the past. Netflix doesn't even have an official queue manager app, leaving that to third-party developers. Actual streaming would be an even bigger stretch, but Netflix may address this situation before Apple's iPad practically mandates coverage.

With iPad's larger screen -- nearly comparable in size to small netbooks and portable DVD players -- video consumption is going to be a popular pastime on it. Netflix CEO Reed Hastings didn't seem to agree earlier this year.

"It is not a huge priority for us because we are so focused on the larger screen," he told analysts during the company's quarterly conference call in January.

So what has changed for Netflix, if this survey is in fact legit and a sign of things to come?

Well, Blockbuster (NYSE: BBI  ) announced two weeks ago that it was teaming up with Deutsche Telekom's (NYSE: DT  ) T-Mobile to offer Blockbuster On Demand through HTC's HD2 smartphones. It's a smart move, but it should be pointed out that iPhone owners have been able to purchase digital flicks through iTunes for a couple of years now.

However, the major stumbling block for Blockbuster, Apple, and Amazon.com (Nasdaq: AMZN  ) is that they are trying to sell piecemeal video, while Netflix gives it away to existing subscribers.

Here's a crazy theory: Netflix has gone from cold to hot on supporting Apple's iPhone, iPad, and iPod touch because it fears that someone -- more than likely Apple itself -- is about to roll out an unlimited streaming service through those devices. If it doesn't land on the beachhead now, it will make it that much easier for somebody else.

The obvious shortcomings don't matter. Will it drain the iPhone battery? Is the Wi-Fi requirement pointless if many iPhone owners also travel with laptops? Will this upset Netflix pal Microsoft (Nasdaq: MSFT  ) ?

It doesn't even matter if the survey is bogus (since the iPod touch omission in the survey is a pretty big oversight). By the end of the year, Netflix will have no choice but to at least stream through the millions of iPads in the wild. It may as well get started.

When will Netflix streaming be available for smartphones? Share your thoughts in the comments box below.

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Microsoft is a Motley Fool Inside Value selection. Apple, Amazon.com, and Netflix are Motley Fool Stock Advisor picks. Motley Fool Options has recommended a diagonal call position on Microsoft. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz has been a Netflix shareholder -- and subscriber -- since 2002. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 02, 2010, at 3:58 PM, drborst wrote:

    That might make think about buying an iPad... which makes me think...

    Netflix is the video store, iTunes the music store. Apple is about to bring video to a mobile device and could use a better video store... Buying Netflix would be a better use of its cash than sitting on it.

  • Report this Comment On March 02, 2010, at 4:59 PM, jdrumstik wrote:

    Think a little harder - APPL doesn't typically acquire companies, and certainly not ones so different than their core business. iTunes is only a way to enhance the iphone and ipod - its a whole culture. Besides, apple already SELLS content through iTunes, Netflix rents it.

  • Report this Comment On March 03, 2010, at 9:44 AM, feldmail wrote:

    I am sure that Netflix is feverishly working on getting on the iPhone and iPad. They just don't broadcast these things in order to be one step ahead of the competition.

  • Report this Comment On March 03, 2010, at 9:44 AM, feldmail wrote:

    I am sure that Netflix is feverishly working on getting on the iPhone and iPad. They just don't broadcast these things in order to be one step ahead of the competition.

  • Report this Comment On March 03, 2010, at 10:24 AM, deansnow wrote:

    but blockbuster is suppose to allow streaming and downloading directly to the phone. itunes does not do that!

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