Last week, Apple finally revealed its grand plan to conquer your TV: a new Apple TV app that brings all your shows and movies together in one place and serves you recommendations.
The idea makes sense. Apple thinks apps are the future of TV, and that eventually you will have separate subscriptions to Netflix, HBO, Showtime, Hulu, and so on — maybe you already do.
In that world, it will be annoying to have to navigate a bunch of different interfaces and menus. So Apple will do it for you with a new app called TV, which not only works on your Apple TV, but also on your iPhone or iPad.
Apple’s TV app will provide you with one place to find new shows to watch, pick up shows where you left off, and buy episodes or seasons from iTunes. It’s “the one place to access all your television,” CEO Tim Cook said last week.
With this app, you can see the outline of Apple’s ambitions for Apple TV: a universal search, browse, and suggestion platform that fetches you the right content as fast as possible.
But there’s a big problem with Apple’s vision — Netflix and Amazon don’t seem to be on board. Neither company, so far, will be part of Apple’s new TV app.
Netflix, which told Business Insider it is still evaluating the opportunity, is a particular blow.
Why is Netflix wary? In note this morning, Stratechery analyst Ben Thompson explains it this way:
“Apple’s desire to be ‘the one place to access all of your television’ implies the disintermediation of Netflix to just another content provider, right alongside its rival HBO and the far more desperate networks who lack any sort of customer relationship at all. It is directly counter to the strategy that has gotten Netflix this far — owning the customer relationship by delivering a superior customer experience.”
Netflix’s direct relationship with its customers is valuable, and it doesn’t want to give that up. And the problem for Apple is that without Netflix (and Amazon, increasingly), the TV app isn’t compelling. In our current TV landscape, if you don’t have these two streaming heavyweights, you aren’t providing a “unified TV experience,” as Cook said Apple wanted.
This is a position Apple doesn’t normally find itself in. Thompson pointed to Apple’s domination of the music industry, which played out very differently.
“The truth is that Apple’s executives seem stuck in the iPod/iTunes era, where selling 70% of all music players led to leverage over the music labels,” he wrote.
But the Apple TV is just another streaming box, and Netflix can already put its content on it with its own app. Unfortunately for Apple, “selling hardware isn’t a point of leverage,” according to Thompson.
That’s why Thompson makes the case that Apple should buy Netflix.
“If Apple wants its usual ownership of end users it needs to buy its way in, and that means buying Netflix,” he wrote.
Analysts at Bernstein also argued earlier this month that Apple could use Netflix to create a competitor to Amazon’s Prime bundle and move Apple away from a transactional business model toward a subscription-based one.
Whatever the reason, Apple would likely have to pay a hefty premium, and Netflix might not want to sell.
But Apple’s current strategy just doesn’t have the juice to conquer TV without Netflix and Amazon. It needs something else.
Disclosure: Mathias Döpfner, CEO of Business Insider’s parent company, Axel Springer, is a Netflix board member.