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iTunes movie rentals vs. Netflix: It's Apples (Jobs variety) and oranges

Apple makes a big plunge into the movie rental business and almost instinctively folks dust off the "Netflix is screwed" line. However, you may want to hold off on that Netflix obituary (again).
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Written by Larry Dignan on

Apple makes a big plunge into the movie rental business and almost instinctively folks dust off the "Netflix is screwed" line. However, you may want to hold of

f on that Netflix obituary (again).

Now it's entirely possible that Apple's movie rental service (gallery, blog focus, video) will be a hit for the iPod carrying masses. And I'm sure I'll rent a movie when I travel. But Apple's movie rental service doesn't spell the demise of Netflix for a bevy of reasons. Here are a few:

  • Apple's movie rental service is confined to the PC and the iPod/iPhone unless consumers buy Apple TV, a device that promises to be better the second time around but still is another box in an already cluttered living room.
  • Apple's rental service is the same pay per view model everyone is used to, but Netflix's model is subscription based. Some consumers will be fine with a rental that self destructs 24 hours once a movie is initiated. Other people--heavy movie watchers--appreciate the all-you-can eat approach of Netflix. They are two different audiences that can coexist. One audience cares that Netflix has a catalogue of 90,000 titles compared to Apple's 1,000 titles. The other audience could care less.
  • iTunes movie rentals are designed to sell iPods. That's a big distinction there. Apple's biggest goal with its movie rental launch was to get all the studios on board so you'll buy its devices. To do that Apple basically agreed to the same model cable companies go with. You pay $2.99 to $3.99 to view a movie for 24 hours. Netflix's model is designed to deliver a recurring subscription revenue stream. Simply put, Apple isn't wasting its time trying to put Netflix out of business.
  • The game is to get into set-top boxes. Apple wants you to buy a new box for movie rentals in a couple weeks. Netflix will be embedded in LG set-top boxes in the second half of the year. In the long run Netflix's plan may make more sense, but good luck ousting the incumbent providers.
  • Netflix's real worry is Blockbuster not Apple. Apple's service will take time to gain mass adoption. Blockbuster has much more potential to give Netflix a headache with pricing pressure and its replica mail delivery model.

Will iTunes be a viable threat to Netflix? You bet. But it's nothing that Netflix hasn't seen before.

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