Why Netflix Won’t Be Part of Apple TV

Elijah Nouvelage/Reuters

Apple and Netflix, for better and for worse, have changed how we spend our leisure hours. In the process, the two companies have upended old media habits and created new ones.

Apple’s iPhones have already ported over big portions of people’s brains, and Netflix exploded TV time slots, creating the binge and the endless content screen. Where else can you find a soothing Japanese reality show like “Terrace House” and a Brechtian, mind-bending drama like “Russian Doll” in one place?

While setting the standard in their chosen areas, Apple and Netflix have gotten along in the past, for the most part. But that period of peace between the two tech giants is about to change.

On Monday, Apple will unveil its most ambitious media project yet — a news and entertainment bundle that is likely to offer access to magazines, newspapers, music and, perhaps most intriguingly, original shows and films. And when a tech giant like Apple jumps into entertainment, it’s going to create waves.

Famous for its teasing product demonstrations, Apple will play host to Hollywood at its Cupertino, Calif., campus so that it can show off what Reese Witherspoon, J.J. Abrams, M. Night Shyamalan and Steven Spielberg (he of the recent Netflix-films-should-not-get-Oscars argument) have done with the more than $1 billion the company has laid out for its new ambitions.

The amount it has spent on new material is nowhere near the $10 billion Netflix will plow into content this year, but Apple has something Netflix does not: more than a billion devices all over the world, which amounts to an infrastructure. That beats out the 139 million people worldwide who have subscribed to Netflix. If Apple is suddenly able to fill the screens of those devices with its own content, as well as programming from other companies it has struck deals with, it will turn itself into a beast sure to put a scare into Netflix.

The cordial relations between Apple and Netflix showed signs of fraying last November, when Netflix, led by Reed Hastings, stopped allowing people to sign up for its service through Apple’s iTunes store.

Apple had been charging Netflix 15 percent on every sale, a blanket condition of being in the App Store. Now, new subscribers can still download the Netflix app on an Apple device, but they will be sent to an external website to submit payment details. (In the wonky world of internet transactions, where you make the purchase determines how, or if, Apple gets a cut.)

In a second sign of frayed relations between the two companies, Netflix has decided to opt out of the Apple bundle, which will upsell subscriptions to HBO and CBS in addition to its original programming. Netflix’s absence from the new platform says a lot about the state of play in the highly competitive streaming industry: a fight is brewing over how content is distributed.

Mr. Hastings explained it at a Netflix earlier this week: “Apple’s a great company. We want to have people watch our service — or our content on our service. And so we’ve chosen not to integrate into their service, because we prefer to have our customers watch our content in our service.”

The key word here is “service.”

Put it another way: Netflix is a service, or a pipe, that would sit on another service, or pipe, if it agreed to be included in the Apple bundle. And if it had joined forces with Apple, Netflix also would have received little to no data about who is subscribing or watching its stuff. Further muddying the company’s identity, from the Netflix point of view, would be the fact that Apple users who spooled up “Stranger Things” or “Orange Is the New Black” may not be aware that they’re watching a Netflix show. Retaining the brand is as important as owning the data.

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Peter Bordes

Exec Chairman & Founder at oneQube
Exec Chairman & Founder of oneQube the leading audience development automation platfrom. Entrepreneur, top 100 most influential angel investors in social media who loves digital innovation, social media marketing. Adventure travel and fishing junkie.
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