Newsflash: Apple is in talks with Comcast, the nation’s #1 cable giant, about starting a new Internet-based streaming service, The Wall Street Journal reports this morning. Topspin: I got three angles for you. First: Comcast shouldn’t do it. Second: This net-TV stuff will be far more difficult than expected. And third: Netflix be wary—your real competition isn’t HBO after all. It’s Apple. And Apple could eat you alive.
Netflix shares are down another 3% this morning, in fact, after dropping 4% on Friday as well.
Word of the Apple-Comcast talks could feel like a betrayal to the folks at Netflix. The high-flying streamer just signed a deal to start paying Comcast extra to give special treatment to Netflix video and plug the feed directly into the Comcast cable box. Now comes an Apple effort to one-up Netflix by streaming not just on-demand movies and series but also live programming, interposing a new Apple gadget (presumably an upgrade of the old and slow-selling AppleTV netbox) between Comcast and its own subscribers.
The Journal says Apple is pushing to control much of the customer contact—and, more importantly, the data on customer preferences, practices, orders etc. Story is here: http://on.wsj.com/1lgr6zt
And that’s a big reason why Comcast shouldn’t do this. The Journal says the big cable guy is fighting Apple on this point, but the question is whether Comcast can resist. It’s like the nerdy kid in the school cafeteria, trading baseball cards with the cool kid who’s also the quarterback; no contest.
Every business today, and especially every digital business, is really two businesses in one: the main business (FedEx ships stuff), but also a business built on data about the first business (which FedEx uses as a value-added extra to let you track-your-package).
Apple knows this well, which is why it has insisted on controlling customer data in its deals with music labels for the iPod and iTunes, with book publishers for e-books, and with newspaper and magazine publishers for the iPad. Haven’t those deals been mostly great for Apple and far less beneficial to the partners in most every instance?
Yes, iTunes “saved” the music business, but Apple takes a hefty 20% cut of every song it sells. Until a court threw out its deal with the biggest book publishers, Apple took a 30% cut of the retail price. It gets 30% of each app sale, though its costs of hosting that online app-store are marginal. And when magazines wanted to appear on the iPad, Apple insisted it be the one to sign up new subscribers; they belonged to Apple not the magazine they were paying Apple to receive.
It’s as if the corner newsstand insisted that people who buy The New Yorker there are its subscribers and not the magazine’s. Ridiculous. Apple’s tough stance contributed to the iPad’s flop as the last-best-hope for print. Apple’s bent lacks respect for content creation, and it hands a bigger chunk of the spoils to distribution (meaning Apple itself). Yet in the Internet age, the tech-wave is supposed to flatten distribution costs and eliminate the middleman.
Howizzit Apple continues to be carve out a role as the fat-and-happy go-between? Somebody—hello Brian Roberts and Steven Burke at Comcast?—should draw the line and put a stop to it.
Next up: Internet TV and the real threat to Netflix: Apple.