Apple Needs to Disrupt TV Before Netflix Does

Before Steve Jobs died, he had a vision of an integrated television set, and he told biographer Walter Isaacson he had "finally cracked it." Two years later, Apple (NASDAQ: AAPL  ) has added a few apps to the Apple TV, but there's still no iTV, no streaming subscription, and no visible plan to upend the cable business.

So far, Netflix (NASDAQ: NFLX  ) appears to be closer to upending the TV market. The company's app can be found on almost every new device connected to a television, and a proposed partnership with Comcast could put Netflix on the cable company's set-top boxes. Netflix is so popular that it accounts for around one-third of the Internet traffic going to U.S. households every night.

What Netflix hasn't done is create a platform that encourages cord-cutting. It offers limited subscription options, has limited content, and doesn't show live sports. This is where Apple could beat Netflix to the punch if it acts before Netflix or someone else does.

The power to upend cable
The holy grail for streaming companies is the acquisition of enough content (including live sports) to allow cable cord-cutting. That would require either billions of dollars in content deals, the strategy Netflix has used, or the creation of a platform that allows content owners to charge what they want. Apple already sells individual TV shows and movies from most major content companies, so the a la carte option is there. But Apple doesn't have a plethora of apps on Apple TV or its own streaming subscription model to compete head-to-head with Netflix.

At the end of the day, to have a significant impact on cable companies, someone is going to have to make live television a reality. In that respect, Apple has a head start on Netflix. Apple TV has the Watch ESPN, MLB.TV, NHL GameCenter, and NBA Game Time apps, and could easily add others from networks like ABC, NBC, Fox, and other content providers. That's where the real power to upend cable lies.

Apple's ace in the hole
One thing Apple has going for it that Netflix doesn't is Disney. Disney has been extremely friendly to Apple, in part because Steve Jobs was the company's largest shareholder. On top of Watch ESPN, the Disney Channel, Disney XD, and Disney Junior are all available on Apple TV. They require a cable subscription for now, but you can see new subscription models opening up as Apple TV apps open up.

App developers have also been quick to adapt when new devices like the iPad come out. Live sporting events like the Masters provided coverage to iPad apps that was once unavailable, with many other sporting events starting to do the same. If Apple opens up the Apple TV, I think it has a chance to expand the innovation to broadcasting, giving it a good chance to upend cable.

Is Apple the disruptive force to cable?
The irony of the last few months is that it appears Netflix has been cozying up to cable companies, even positioning itself more as a content producer (like HBO) than a streaming company. Has Netflix lost the desire to make cord cutting a reality?

Apple still has a chance to be the revolutionary force in media distribution, and the groundwork is set with Apple TV. If the device is improved and it's opened up to developers, Apple could have another hit on its hands. But so far Tim Cook hasn't been as gung ho about upending cable as Steve Jobs was.

Is Apple TV Apple's next transformative product?
Apple has a history of cranking out revolutionary products... and then creatively destroying them with something better. It's done so with the iPod and computers, and you can find out more about the future of Apple's product lines in the free report, "Apple Will Destroy Its Greatest Product." Can Apple really disrupt its own iPhones and iPads? Find out by clicking here.


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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 October 22, 2013, at 11:54 AM, geoslv wrote:

    I'm still wondering whether an internet company can act like a cable company, bringing ALL the networks. And charge for individual networks. Is that not an option?

    That's the only point we're hoping for.

    And it should work for all computer systems, not just Apple.

  • Report this Comment On October 22, 2013, at 12:45 PM, FrugalDude wrote:

    Netflix already has an exclusive deal with Disney (including subsidiaries Marvel and Lucasfilms) beginning in 2016. Plus you are trying to compare a service (Netflix) with an hardware device (Apple TV). Sure Apple offers an end to end ecosystem but the strengths you point to are not unique to the device and available on numerous other platforms. Apple doesn't even offer a subscription service that I know of. Netflix's primary competitors are things like Amazon Prime and Redbox Instant this point. Netflix got out of the hardware business when it divested itself from Roku.

  • Report this Comment On October 22, 2013, at 12:50 PM, FrugalDude wrote:

    Also, MLB, NHL, and the NBA all have streaming options available now to subscribe to and stream on numerous devices. The NBA recently signed a deal to allow Fox and NBC to stream games which would be locally blacked out as well. Apple is actually very behind the curve on this. The future is not one in which a single provider will funnel all content to you like the cable companies do now, but one which the user has many choices to get the content they need. The only hope the cable/satellite companies have is to offer ala carte options to subscribers....

  • Report this Comment On October 22, 2013, at 7:57 PM, RickRickert4MVP wrote:

    FrugalBro - is the MLB streaming option still only available to those that live out of the market of the team they subscribe to?

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