Let’s get a couple things out of the way:
1. I own Apple stock. I’ve owned it a long time. (I am long Apple, in other words.)
2. Yes, I’m an Apple Fanboy. I use an iPhone, an iPad, and several Macs. I even have an Apple TV.
3. I received nothing from Apple for this post.
That out of the way, this article from the Wall Street Journal was less about remotes than the cable industry about to get caught in the same disintermediation storm that attacked newspapers, the music industry, and the Postal Service. Netflix has done things that I didn’t think possible and I don’t think that Google TV (or Apple TV) is going to stem the balance of power away from Netflix.
If you were starting a television network today — or even a program — there’s more than one way to do it now. AMC has quality programs instead of clunky reruns. MTV hasn’t played music so long that teenagers today don’t even remember Beavis and Butthead. FX? USA? There’s a million ways to get a decent audience, but network TV is still the biggest one.
Techcrunch got bought by AOL last month. Ok, fine, AOL’s reinventing itself. Again. On the first link from AOL’s front page, Techcrunch says its traffic tripled. TRIPLED. You and I know AOL is “lame” but what Mike Arrington calls the “normals” don’t. They’re the ones watching Two and A Half Men. They’re the ones who think Jim Belushi’s show is cool. They’re the ones who click on web ads and Cialis spam, right?
AOL seems to have an interesting niche, but it’s Yahoo that has the best online content. They have AMAZING sports networks, great video across several verticals, and yet no one talks about them. The traffic? Great. More normals. I bet there’s people out there who still have their home page set to netscape.com. Jeez … it’s still active! And goes back to AOL!
So to get back to cable and the so-called cable cutting, there’s always two things that seem to be the issue. First, how do you get normal people to stop watching Charlie Sheen make dick jokes and search for some edgy content from FX? Second, what about sports, especially LIVE sports? I have no idea on the first one. I don’t think anyone does. On the second, I think I do.
Buy Disney (DIS). Disney’s a huge company, with a $68b market cap. It’s known worldwide, has a quality and sustainable brand, but it’s also likely undervalued. Compare it to Google (GOOG). They have three times the market cap and a stock they could use as currency. While Netflix might be the current darling, growing its subscriber base and cutting costs by shifting to streaming from mailing, they still have a lot of cost. If recent data is right and Netflix peaks at 20% of net traffic at times, that’s precisely the thing that Comcast is going to monitor, throttle, or - better - charge for. You want to cut your cable and watch Netflix? You’ll still need Comcast’s pipe. (Or Time Warner, or AT&T, or whoever your provider might be.) Google or Microsoft could buy Netflix without blinking too hard, integrating their service and subscriber base into Xbox, Google TV, or whatever.
Disney’s a different story. Disney has content, not only in its movies, but in its catalog. They have distribution, with ABC. They have hearts and minds, built like a religion with childhood memories. Most importantly, they have ESPN. Perhaps even more importantly, Steve Jobs, the CEO of Apple, is also Disney’s largest shareholder, after selling them his enormously profitable Pixar studio.
By buying Disney, Apple would immediately gain a massive advertising advantage over Google. Integrating iAds with broadcast ads? Don Draper’s loving that idea. Using your iPhone as a guide or ticket at Disneyland? Perfect. Most importantly, Apple could stream ESPN’s live content to your phone, your tablet, your computer, your Apple TV unit … wherever. ESPN, and to some extent Disney itself, is reliant on cable fees. Every household, whether they watch sports or not, pays to have ESPN and all the other ESPN channels. That amounts to billions of dollars in annuitized income, which is what’s allowed ESPN to buy programming, subsidize its online platform (no, it’s not profitable), and to roll around in money there in Bristol.
Apple has enough cash - over $50 billion - to buy almost anyone and a stock that is immensely valuable. If the next opportunity is in capturing people who are cutting their cable, Apple is uniquely positioned to do it. They have the content, they have the devices, and if they wanted, they could have an end run around the wires if they so desired. Granted, that would take a massive rollout of 4G that could handle video better than 3G ever did, but there’s a possibility.
Capturing sports - all of them, all over the world - would be something that almost no one else can do. That one, News/Fox, hasn’t seemed to figure it out yet and is notoriously anti-internet. If Apple buys Disney, they win. Which war do they win, you ask? Content? Delivery? Wired? Wireless? Devices? Advertising?
All of them.
