Reports that Apple (Nasdaq: AAPL) will take aim at Hulu and Netflix (Nasdaq: NFLX) have drawn mixed reactions about its viability.
A Bloomberg report indicated Apple is in talks with News Corp. (Nasdaq: NWS) to let iTunes users rent TV shows for 99 cents. The rental period would be for 48 hours, much like it is with movies. The report also said CBS Corp., NBC Universal and Walt Disney are in talks with Apple as well to get their TV shows in on this potential deal. It said Apple has plans to unveil the new offering in early September at a media event in San Francisco.
Gleacher and Company analyst Brian Marshall said the move would broaden the appeal of the iPhone, iPad and iPod touch. Furthermore, he sees this as a win-win solution for both Apple and the content creators.
"This would be a controlled environment for Apple that would make a lot of money for them," Marshall said. "I think it's a step in the right direction, which is into the living room. Apple TV will be a big product, the reason it's not today is because the lack of content. 55,000 episodes of TV on iTunes sounds like a lot, but they need more. This will do that."
Marshall said for the content creators, getting their TV shows on the approximately 200,000 iPhone, iPad and iPod touch devices sold would be just as big. "Contributors realize and recognize Apple is a powerful distributor," Marshall said.
However, not everyone is as keen as Marshall is on the potential new iTunes services. Arash Amel, research director of digital media at research company Screen Digest, said even if this offering comes to fruition, users will continue to go to Hulu and Netflix for online TV.
"The reality is the market for consumer-based internet TV is either subscription," as with cable channels, "or free [advertising-supported]. TV show rentals for 99 cents against streaming Netflix or free Hulu services is not viable. We don't have high hopes for it at all," Amel said.
Amel said renting model has failed in the past -- Apple failed to convince studios to slash rates for their content ahead of the iPad launch, and they didn't manage to create a subscription-based service for iTunes, though it has been rumored for years.
Despite the sway of the iPad, iPhone and iPod Touch, Amel said there is no reason for the situation to change. "The model they are employing doesn't fit for the TV, it hasn't worked anywhere except with movies where there's a history of rental transactions," he added.
Andy Hargreaves, analyst at Pacific Crest Securities agreed with Amel. "I don't think it can compete. The only people who might pay 99 cents to watch their favorite TV show are people on a plane. But I doubt people will sit at home or work and watch like they do with Hulu," Hargreaves said.
Apple, Hulu and Netflix all declined to comment.
International Business Times, The Global Business News Leader
