Apple launched a film and TV streaming service on Monday, going head-to-head with Netflix. Netflix executives laughed off the threat, joking that Apple is “very late to the game.”
True, Apple is late. Netflix has a decade-long head-start and even Amazon jumped on the trend in 2011. But it doesn’t matter how late Apple gets into the game, it always destroys the competition in a matter of years.
Think Apple has lost all direction and creativity? Think again. Here’s why Apple could make Netflix obsolete.
People love to credit Apple for giving birth to new technology: the iPhone, iPad, MacBook, iPod. But Apple didn’t invent any of these revolutionary products.
The iPhone wasn’t the first smartphone on the market. Not even close. IBM launched a smartphone in 1992 – fifteen years(!) before the iPhone went on sale. Even Blackberry beat Apple to the market by five years. Where are these products now?
Microsoft introduced the personal computer years before Apple and commanded a 90 percent market share. Microsoft also launched a tablet ten years before the iPad. And the first MP3 player hit the stands in 1997, four years before the iPod.
Apple is never the first to market, but it always beats the competition eventually.
When Apple launched Apple Music in 2015, we saw the same alarming think-pieces. The Verge claimed “Apple waited too long to get into music streaming.” But it only took Apple three years to overtake Spotify in the US.
Startups like Spotify and Netflix might have a first-mover advantage, but Apple is the biggest company on the planet. That comes with immense power (and money) to leapfrog the early leaders.
When Apple’s streaming service is live, it can instantly push it to over a billion devices worldwide.
Apple needs just 10% of those devices to subscribe to Apple’s new streaming service and it will equal Netflix instantly. Apple doesn’t need a huge marketing campaign, it just needs a push notification.
Apple has a whopping $257 billion in cash reserves (enough to buy Netflix outright). To put things into perspective, Netflix’s free cash flow is negative $1.3 billion.
Apple is currently spending a meager $2 billion on original content for its streaming service, which is dwarfed by Netflix’s $15 billion. Apple only needs to turn on the tap and it could eclipse Netflix’s spending power.
As CCN.com reported, Apple’s services business is expected to pull in more than $50 billion by 2020. With iPhone sales slowing down, Apple is shifting its focus to services (App Store, Apple Music, and the new streaming service).
By packaging together lots of services, Apple could also undercut Netflix’s rising subscription fees.
It’s easy to criticize Apple for being late to the party, but they are obviously taking their time to get it right. Steve Jobs claimed he had “cracked” TV before he died. And Tim Cook said: “This is an area of intense interest,” back in 2012. “We are going to keep pulling the string and see where this takes us.”
Now it’s ready and Tim Cook is about to put the weight of a trillion-dollar company behind streaming. Netflix execs shouldn’t be complacent. They should be terrified.
Apple’s live-stream of the event can be found here.