Please ensure Javascript is enabled for purposes of website accessibility

3 Reasons Why Apple TV Isn't the New Netflix

By Rick Munarriz - Sep 1, 2015 at 11:09AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Reports indicate that the world's most valuable consumer tech company is going Hollywood in a push for exclusive content. It won't be as easy as you think.

 



It seems as if Apple (AAPL 0.91%) wants to be a TV star after all. Variety is reporting that the consumer tech giant has been in talks with Hollywood studio executives. Talks are still preliminary, but the goal appears to be for Apple to bankroll original content in a bid to arm itself with enough exclusive programming to take on Netflix (NFLX 2.73%) and other streaming services.

Shares of Netflix naturally opened lower on the news. Apple is Apple. It's a tastemaker. It's a game changer. It has more cash in the bank than any other company on the planet.

However, before we crown Apple as the victor of a war that it hasn't even entered, let's take a look at some of the reasons why Netflix investors don't need to start feeling nervous.

1. "What's in the box?" -- Brad Pitt in Se7en
Apple is hosting its next product unveiling on Sept. 9, and while it's widely expected to be the debut of the next iPhone, there's also some chatter about it serving as the springboard for the next generation of Apple TV.

Apple's set-top device has been a decent performer in this niche, but not the mass market category killer that it could have been in a market dominated by cheaper gadgetry. One would think that a subscription-based streaming platform would be tied to Apple TV, but if the new content offering is being used as a way to make Apple TV stand out -- and reportedly at a higher price point than the current set-top box -- that exclusivity could also be a deal breaker.

Netflix became the undisputed champ of premium streaming with 65.5 million subscribers worldwide because it's available in many different ways. Video game consoles, Blu-ray players, smart TVs, and any set-top device that matters offer Netflix access. The app is easily accessible on any mobile or desktop device. If Apple TV's streaming TV offering is limited to its own box or even its own iOS, it's as good as toast.

2. "You come at the king, you best not miss." -- Omar in The Wire
Tech giants have a funny way of thinking that they can dominate an industry with dedicated leaders, but that hasn't historically been the case. We've seen all of the tech heavyweights -- Apple included -- make a play for streaming music, failing to make a dent in the niche leaders.

Apple is a titan of tech with gobs of dough and a mainstream hardware hit, but the same thing could be said about the Xbox, and last year it pared back its once-ambitious dream of running a production studio to put out exclusive content. 

Being Apple isn't enough, and in some cases, being an established tech behemoth can be more of a liability than an asset. 

3. "None of us are the same as we were a moment ago." -- Scarlett Johansson in Her
One of the last things that Steve Jobs told his biographer before he died was that Apple had cracked the code when it comes to TV, and it's now been nearly three years since CEO Tim Cook declared TV "an area of intense interest" in an NBC television interview. 

That may all have been true, but three to four years is an eternity in this rapidly evolving market. Apple has been too slow to embrace streaming TV as a subscription service. Netflix's subscriber base has nearly tripled since Jobs "cracked it," and even some traditional pay-TV providers have entered this niche before Apple.

Apple fans will argue that the class act of Cupertino doesn't have to be first -- it just needs to get it right. That's true, but if we've learned anything with the less-than-spectacular Apple Music makeover and Apple Watch post-launch hype, it's that Apple can also be mortal. If Apple gets too cocky by either making a platform too exclusive or pricing itself out of reach, it will have to settle for a thin slice. Outside of an outright buyout of Netflix, gutting Apple TV as a hardware platform, or sacrificing near-term margins for the sake of ramping up the mother of all digital catalogs, it will be hard to take an Apple premium streaming TV platform seriously as a category killer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$138.60 (0.91%) $1.25
Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$188.48 (2.73%) $5.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
331%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/20/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.