iTunes Replay Won’t Help Apple Fell Netflix Just Yet

NFLX's unlimited access still too popular

   

iTunes Replay Won’t Help Apple Fell Netflix Just Yet

Apple (NASDAQ:AAPL) is feeling good. It’s got $76 billion in the bank. It’s on its way to becoming the biggest smartphone maker in the world in terms of raw cash flow. The iPad has, in just more than a year, come to define an entire segment of the technology market, dealing a vicious blow to the consumer PC market. Things are pretty peachy.

However, with the exception of the indomitable App Store, Apple has been frustrated in its efforts to grow as a media distributor. iTunes growth has slowed in recent years, and the iBookstore has proven to be a nonstarter, crushed under the dual heels of Amazon‘s (NASDAQ:AMZN) Kindle and Barnes & Noble‘s (NYSE:BKS) Nook stores. The less said about the Apple TV — a $99 set-top box that was supposed to secure Apple’s dominance of living rooms through cheap digital video rentals and sales — the better. iTunes Replay, however, might change that.

iTunes Replay is less a whole new business and more a reconfiguration of the company’s existing iTunes video sales model as an attempt to combat the growing streaming video market. According to a rumor about the service at AppAdvice (via GigaOM), rather than paying for a single download of a video, iTunes users will be able to download videos marked for iTunes Replay as many times as they want on multiple devices.

These videos also will be streamable to certain devices, but it’s unclear if this means the Apple TV box or other machines as well (the Apple TV already facilitates video streaming from the iPad to televisions). The downloads will not be unlimited — the report says some will be downloadable only up to five times. No details on altered pricing were mentioned.

In digital video, there’s Netflix (NASDAQ:NFLX) and there’s everything else, a fact that has crystallized over the past two years as that company’s subscribership grew past the 25 million mark. Apple’s iTunes, still a leader in the downloadable video sales and rentals market, has watched its dominance start to crumble.

A February report from iSuppli found iTunes’ share of the on-demand video rental business fell from almost 75% in 2009 to 65% by the end of 2010. Its closest competitor is Microsoft (NASDAQ:MSFT), which controls an 18% share of the market. These numbers represent only single-sale, downloadable services, however, not subscription-based streaming services like Netflix or even Hulu. It’s unclear just how much money Apple has lost to that separate market.

As described in the report, iTunes Replay isn’t going to win back any customers from Netflix. That service has been so successful in recent months precisely because it provides unlimited access and doesn’t require the consumer to think about each purchase. Netflix also is available on almost every electronic device in the world — you can watch Netflix on a refrigerator at this point.

Apple, however, has become more and more restrictive about what platforms its iTunes software runs on, foregoing compatibility with things like Google (NASDAQ:GOOG) Android smartphones and video game consoles like Sony‘s (NYSE:SNE) PlayStation 3 — precisely the platforms that have helped Netflix become ubiquitous.

Even if Apple decides to release its own line of Internet-connected high-definition televisions as some analysts expect it to, iTunes Replay simply won’t be enough to win away the Netflix audience. Unless, of course, Apple is willing to pursue a subscription-based payment system giving users access to a swath of videos for a single monthly price. If it does that with iTunes Replay, some folks in Los Gatos, Calif., should be very worried.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.


Article printed from InvestorPlace Media, http://investorplace.com/2011/08/itunes-replay-apple-netflix/.

©2014 InvestorPlace Media, LLC

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