Apple's Plan to Disrupt Cable Is Also Netflix's Nightmare

For Apple (NASDAQ: AAPL  ) , cable companies are more "frenemy" than enemy. New deals bring HBO GO and WatchESPN to all Apple TV users who have cable plans that include access to those channels.

Viewers also gain access to SkyNews for coverage of breaking news in the U.K. and Ireland, Crunchyroll for Japanese Anime, and Qello for on-demand streaming for concerts and music documentaries.

Promotional video for HBO GO on Apple TV. Sources: HBO, YouTube.

"HBO GO and WatchESPN are some of the most popular iOS apps and are sure to be huge hits on Apple TV," said Eddy Cue, Apple's senior vice president of Internet software and services, in a press release.  

Viewers benefit by getting access to a better interface for live sports programming and HBO's full library of content, while cable companies preserve their connections to subscribers. Everyone wins, right? For now, yes. Just don't mistake Apple for anything other than a disruptor.

Apple says customers are downloading 800,000 TV episodes and 350,000 movies per day from an iTunes Store library that includes 60,000 movies and 230,000 TV episodes. All told, more than 1 billion TV episodes and 380 million movies have been downloaded so far.

Mix in iCloud syncing and precisely the sort of HBO integration I suggested in April, and you've the makings of a compelling "TV Everywhere" platform that could make both Apple TV and the iPad hot commodities among cord cutters.

Meanwhile, the lines between Netflix (NASDAQ: NFLX  ) and HBO, its primary rival, are blurring. Adding HBO GO to Apple TV suggests parent Time Warner is interested in expanding the service beyond a handful of other devices. Doing so would blunt Netflix's distribution advantage.

Could Netflix win a battle waged just over great content? Founder Reed Hastings expressed some concerns in a recently posted manifesto covering the company's long-term strategy:

While we are passing HBO in domestic members in 2013, it will be several years before we are peers with them in terms of Original programming, Emmy awards, and international members. It wouldn't be surprising to us if HBO does their best work and achieves their highest growth over the next decade, spurred on by the Netflix competition and the Internet TV opportunity.

Translation: It's early. But not so early that Netflix can sit idle as Apple revs its iTunes engine. Investors need to see Hastings and team not only funding originals but also exploring cheaper expansion options, such as rescuing cult hits that may have been canceled too early.

Do you agree? Are you more likely to buy an Apple TV as a result of HBO GO? Let us know what you think of Apple, HBO, and Netflix in the comments box below.

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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 June 23, 2013, at 4:08 PM, lkknapp wrote:

    Already have four(five including we bought for mother) Apple TVs. But we have TiVo Premier XL4 and mini TiVo also.

  • Report this Comment On June 23, 2013, at 5:48 PM, legacys7 wrote:

    HBO won't prevail. Two reasons. One, HBO doesn't have the movie rental that Netflix has. The second reason, Netflix doesn't need cable to view it. I do hope that cable does go away. And then there's Android t.v.

  • Report this Comment On June 24, 2013, at 1:51 AM, beetlejuicy wrote:

    " .... Mix in iCloud syncing and precisely the sort of HBO integration I suggested in April, and you've the makings of a compelling "TV Everywhere" platform that could make both Apple TV and the iPad hot commodities among cord cutters." Well, I think we need to clarify the true interpretation of "cord cutters". The true meaning of cord cutting is to cut the cost of cable -- not to simply be free of the box and cabling (i.e. the Roku Timewarner cable app, ESPN3, HBO Go etc). Nobody's clapping their hands saying 'Yay' because we can continue to get ripped off by these blanket bloated cable packagest -- just because we can also watch on our Iphone away from home! You've changed nothing with this. For Apple to show some balz and bring their stock out of the toilet, they need to disrupt the television paradigm, and offer us some of these channels a la carte. Perhaps true cable cutters can watch sports, or the Sopranos, The Walking Dead, maybe some Lifetime movies, CNN?? Yes Timewarner cable owns some, Disney owns some. Tough work -- but that's what cord cutters actually want. NFLX has managed to come up with a decent variety of content across the boards -- except Sports and news. But hey -- doesn't AAPL have a few more dollars than NFLX? I think so. One example is the MLB network which you can actually buy without being bound to a cable subscription. I know NFLX didn't arrange this. Just saying it's what cord cutters want. So far, I'm really disappointed with this lame concept of the new Apple TV. Lame. Especially since we've been waiting so long to see what it is. Roku blows the current AAPL TV away. Way more channels (though no direct Youtube). Come on Tim Cook, you're better than this. Ever seen the Peel app on the Samsung Galaxy tab? Sounds like Appl's new ITV is just a souped up version of this -- and I had the Galaxy tab for over 2 years now! A Roku remote with a prettier GUI? What a joke. (and I'm an AAPL shareholder). Man I sure hope everyone else is as easily impressed as you are. Maybe they can buy my shares! Thanks for the article.

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