Variety's article is new, but certainly the inevitability of Apple entering the premium streaming video game -- as well as the article's focus on Apple's quest to create compelling and differentiating original content -- is not (I have written about it several times). And, much like Apple finally choosing to focus on buying/building its own "Spotify Killer" on the subscription streaming side for music (and finally recognizing that the times had moved away from a "pay per download" model), Apple at long last will go the same route for video (initially focusing on longer-form premium video content like movies and series).
With this most recent story now breaking before Apple's upcoming announcements, it is worth revisiting my earlier analysis where I pit Apple v. Netflix. In that direct battle royale -- which absolutely will happen -- who wins? Let's analyze 5 individual battles that define that war.
(1) Content/Programming -- Let's take Apple first. Apple will offer (i) both VOD and live/linear TV (Netflix only offers VOD), and (ii) both ESPN and HBO, the two premium channels that matter most (Netflix doesn't). How does Netflix counter this attack? In two ways (i) exclusive original "must have" programming like House of Cards and Orange Is the New Black (although -- as I wrote months ago -- you can bet Apple absolutely will get into that "originals" game as well (and smartly fast-track those efforts by buying a high-end and highly-respected production house with deep relationships -- or perhaps even buy a major Hollywood studio), and (ii) a significant depth of content that Apple will not have ... at least for a long time. Advantage Apple.
(2) Distribution -- Apple's ecosystem is closed. Netflix's is open. That means that Apple's OTT video service will be bundled only into Apple products, whereas Netflix comes with virtually everyone else (including Apple TV -- although you can bet that Apple's Netflix-Killer will be front and center and free (at least for a while) on Apple TV's when it launches). So, Netflix's sheer reach significantly outdistances Apple. Oh yes, and Netflix already has built a massive customer base -- and is growing fast internationally. Advantage Netflix.
(3) User Experience -- Virtually everyone on the planet has Netflix. It's part of our Zeitgeist and its UI is practically burned into our brains. So, it is easy to use. But, Apple's hallmark is user experience -- a UI/UX that is both "pretty" (yes, that matters) and intuitive/easy. And -- and this is a critical "and" -- Apple can do (and does) what Netflix and others can't. It seamlessly integrates software/services with its hardware (including Apple TV). That means that Apple's new OTT video service will be front and center and easier to use. Advantage Apple.
(4) Price -- Netflix charges $8.99 monthly for new users, whereas Apple's "killer" service likely will cost significantly more. ESPN alone costs cable/satellite operators about $6 monthly per sub. Advantage Netflix.
So, we have a draw here, right?
(5) Business Model -- Well, here's the ultimate rub. The companies' fundamentally divergent business models.
Neflix is a pure-play video service. The company monetizes its service only. That is its business model -- and that means that it must be profitable based on subscription revenues alone (unless and until it finds a way to effectively mine its treasure trove of customer data).
Apple's business model is fundamentally different. For Apple, its "coming soon" OTT video service can be (and likely will be) a loss leader -- a losing proposition that ultimately wins. You see, Apple's core DNA is unlike Netflix's. It is hardware pure and simple. Apple makes money (boatloads of it) by selling "cool" metal -- iPhones, iPads, Apple Watches, Apple TVs (and ultimately the iTV?). That means that Apple's new video service is essentially a "marketing" expense that drives incremental hardware sales. That also means that Apple can (and will) subsidize its content licensing costs -- and original programming efforts -- in order to keep its subscription pricing down. Apple's massive cash hoard offers a lot of highly coveted freedom that others simply don't have.
How does Netflix match that? Maybe, Apple simply buys Netflix with all that cash -- after all, as massive as Netflix is, its market cap is a downright paltry $49 billion compared to Apple's $643 billion, which includes about $200 billion in cash). Now THAT would change the media landscape ....