April 11, 2007

How Apple Could Crush Netflix Now

Let's make this clear. I have almost zero interest in owning my movies or TV shows. Unlike music, which I could listen to over and over until I had the lyrics memorized, TV shows and films have a very limited shelf life. It is a rare film that fills me with the need to see it more than once. TV shows are even worse. Outside of The Simpsons, once I have seen a show, I'm done with it. When I record shows on TiVo, I always delete the episode when I'm done. When I have watched TV shows I've purchased from the iTunes Store off my Apple TV, I delete them.

(Also see: What is the True Value of an Entertainment Download?)

Today, Apple announced that MGM has added its movie library to the iTunes Store, joining other Hollywood names like Paramount, Disney and Lions Gate. But when I go to the iTunes Store and shuffle through the offerings, I'm not buying. Not a single film. I am not going to pay $9.99 to $14.99 for a film that I will need to download and then watch once or twice at the most. But I most definitely would be happy to sign up and pay $20 or $30 a month to Apple for the privilege to download a set number of films per month, or of course, an unlimited number, even if Apple set restrictions such that I could only watch the downloaded films once or twice, or even tracked how many films I had downloaded, such that I didn't have too many "out" at one time - just like NetFlix does.

Apple's iTunes application tracks how frequently I listen to my music, or if I have watched a TV show. The Apple TV knows to only synchronize those shows that are unwatched (i.e. Plays = 0). If we take this a logical step further, Apple could allow customers to download films, and once the play count reached 2, they would no longer be playable, either on the Apple TV or on my laptop. And yes, I know that one way to trick iTunes would be to stop watching the film before it had reached zero seconds remaining, but that goes back to Apple only allowing a set number out at one time.

In Variety's coverage of the MGM announcement, they note that Apple isn't selling many movies online, and that the rate of adoption is hardly increasing. (Also: PaidContent's take). The company's online movie sales grew from 1.3 million from September to January, to 2 million-plus today. That's not much growth. Maybe the millions of people who have access to the iTunes Store, as I do, are happy with using NetFlix and that company's subscription model. Maybe it's a bandwidth issue. But regardless, they're not exactly jumping on it.

How do you fix that problem?

1) Apple keeps DRM on iTunes movies.
2) Apple introduces a subscription model for iTunes movies.
(3 movies a month for $12.95, 5 movies for $19.95, etc.)
3) Apple enhances the DRM to not play the file after a certain number (say 2) of plays.
4) Apple keeps the option to buy the films if you want, and at a reduced rate if you have already "rented" the film.

I would do that. If Apple introduced this feature, I would cancel our NetFlix subscription tomorrow. The portability of iTunes via the laptop and the Apple TV is nearly as good as any DVD, doesn't require shipping, and won't force me to wait days from when I order off NetFlix to get my movie fix. Apple has all the tools - the DRM, the Media Store, the desktop application, the iPod and Apple TV media players. It just needs to look Hollywood in the eye, and give customers what they want.


  1. I like your proposal, and certainly at some point I would cancel my 9-yr old Netflix subscription and I'd rather give Apple my money.

    But I rent a fair number of odd French movies, BBC documentaries, and Japanese mangas: until Apple accumulates a long tail similar to NFlx, I have to stay with NFlix.

  2. although I'm an Apple fan, they'll be hard pressed to beat Netflix in my book. I can churn through way more than three movies a month. Plus, DVD is better quality than the iTunes downloads.

    That said, I have been using the iTunes store to download recent TV shows and podcasts that haven't shown up on DVD yet.

  3. Absolutely. I currently use Blockbuster online and go through about 4 to 5 movies a month. If I see ones I really like, I'll buy it off of Amazon. If Apple could provide a similar model, I would happily switch my rentals and my purchases to them.

    In return for a monthly fee, give me up to three movies at a time but don't limit how many times I play them. That would be equivalent to Blockbuster online (and I think to Netflix). If I like something, give me a button that says "buy it now". I wouldn't even have to download it again since it's already on my harddrive.

    Come to think of it, I know someone who works on the iTunes team. Maybe I'll send them your post. :)