April 12, 2011
Following last week’s report Apple has ordered as much as 12PB of data capacity from Isilon Systems, comes speculation on what the Cupertino, California-based company will be doing with all of that storage. In news first reported by Business Insider, Jefferies analyst Peter Misek believes Apple is about to take on Netflix by offering an advanced web-based video subscription product. According to the Jefferies report, which Business Insider says is based on “informed speculation more than hard fact,” the new service will operate out of Apple’s North Carolina data center, which might double in size soon. From there, the company is expected to open “super data centers” across the U.S. and then in Europe. One sign an Apple video subscription product is closer to becoming reality is the ongoing conflict between cable companies such as Time Warner and Cablevision and network executives over TV streaming rights. According to Misek:
"We find it notable that the content companies, citing a lack of domain license, asked Cablevision to remove channels from its iPad app. We believe these same companies are negotiating some sort of deal with Apple."Misek states other reasons for the video service:
"In terms of content we think some sort of subscription model also makes sense ... We believe Apple has learned much from having Netflix on the Apple TV and we cannot help but feel Apple will try to improve on this model somehow. So how does Apple convince Hollywood and other content creators to license it? In our view, the best way to do that would be the model they use for App developers: let them take the vast majority of the revenue while you use the content to drive device sales and monetize it that way. We are huge fans of iTunes, but that cannot be it from Apple. There is another level coming here and we see this as one of the most fruitful potential uses of Apple’s enormous cash hoard."The analyst also speculates this could be Steve Jobs’ swan song; he expects the Apple CEO to step down soon, but not before Apple’s cloud system is in place. Misek also sees an actual Apple TV product in 2012 or 2013. Recognizing Misek’s analysis is not based on facts (at least as far as we know), an Apple video rental service still makes a lot of sense. After all, millions of iDevices are already in the marketplace. Turning these into little streaming devices (which they already are for Netflix customers) with Apple as the provider wouldn’t be a giant leap. Still, the devil will be in the details. For one, Netflix isn't going to go away quietly. Second, Apple will have to provide a vast lineup of content to get customers excited. Hopefully, we’ll hear something about this soon. What are your thoughts? Leave your comments below.