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iTunes rentals just tenth of Netflix numbers, says analyst

updated 10:55 am EST, Wed December 29, 2010

Estimated to be 475,000 per day, mostly TV

Video rentals from iTunes represent just a tenth or so of those recorded by Netflix, suggests Gleacher & Co. analyst Brian Marshall. Apple recently revealed that people are buying or renting about 150,000 movies and 400,000 TV shows through iTunes each day. Assuming that 75 percent of movies and 90 percent of shows are rented, says Marshall, Apple should be serving about 475,000 rentals a day versus Netflix's 5.1 million.

Correspondingly, Apple is believed to make about $60 million per quarter from rentals, and $50 million from purchases. In September, Netflix reported quarterly revenue of around $550 million. While rentals are the entirety of Netflix's business, however, Apple is generally believed to use the iTunes Store to drive hardware sales. Netflix support is in fact present on the Apple TV, and likely boosting traffic of the set-top.

Marshall theorizes that if Apple can grow rentals at the same rate as Netflix, they will come to form over $1 billion in revenue per year within five years. A 30 percent cut would give Apple $300 million in take-home money, whittled down further by expenses like hosting.






by MacNN Staff

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Comments

  1. vasic

    Joined: Dec 1969

    +6

    Nothing short of remarkable

    NetFlix has been in rental business for over ten years. In addition, NetFlix's business model is brilliant -- they charge monthly subscription, regardless of how many actual rentals take place.

    Meanwhile, Apple's rental model has been around for a fairly short time, and it has been hampered by the content owners who keep sabotaging Apple's efforts. And yet, the volume of rentals at Apple has already reached 10% of volume on NetFlix. This is a significant achievement for Apple.

  1. chefpastry

    Joined: Dec 1969

    +1

    Good results

    It's all good. I'm happy to see these numbers. I remember when Apple sold less music than CDs, too.

  1. testudo

    Joined: Dec 1969

    -6

    Re: Good results

    They still sell less music than CDs.

  1. testudo

    Joined: Dec 1969

    -6

    Re: Nothing short of remarkable

    Tone down the hyperbole there. It is not 'remarkable' that they did this. There's enough apple fanboys who love everything Apple does to start them off with good numbers regardless of the actual overall appeal.

    NetFlix has been in rental business for over ten years. In addition, NetFlix's business model is brilliant -- they charge monthly subscription, regardless of how many actual rentals take place.

    Which is why it is less than remarkable. While you see this as some kind of 'Netflix raking in dough', the actual truth is that there are a lot of people who use Netflix because they rent A LOT of content. Apple, meanwhile, makes a higher price per rental. If anything, I would have been shocked if Apple wasn't raking in all that cash, considering how high-priced Apple's content is compared to competitors.

    The real question is whether Apple will be able to stick to it's 'price per download' strategy as Netflix gets more and more into downloads.

    Plus, all these numbers are just guesswork. The $60 million is just some speculation from an analyst, so it could be higher, it could be lower. h***, just look at the 'If Apple can grow their service at Netflix's rate, they could make....". Does he give a reason why he thinks apple could grow at that rate? Or whether it is even possible, since Netflix's rate was with little competition in the rental business, while Apple has several competitors.

  1. vasic

    Joined: Dec 1969

    +1

    One more thing

    I'll say it again, it is quite remarkable, considering that NetFlix actually rents shiny plastic discs for DVD players, hooked up to family room TV sets, which now exist practically in EVERY US home. Meanwhile, Apple rents ONLY downloads, to people with AppleTV, or for playback on portable devices, or home computers. Very small percentage of population bothers watching TV on anything other than, well, TV.

    In other words, while NetFlix has an addressable market space of practically 300 million people, Apple realistically doesn't have more than 100 million (people who have some version of iTunes), majority of which would never consider watching TV on those non-TV screens.

  1. Raman

    Joined: Dec 1969

    +3

    Sorry, Apple

    I own a new Apple TV and it's all fine and dandy but I'm not paying $x if it's already on Netflix (instant streaming or otherwise). There's no way I'd pay what apple charges for its rentals when a $8 a month or so Netflix plan offers similar content.

    I own AAPL stock and harwdare but I'm not drinking *that* much Kool Aid.

  1. andrewbw

    Joined: Dec 1969

    -1

    Silly

    Renting content from Apple is interesting only for the limited TV content (ABC/Fox) since you can have access to shows well before they're available on services like Netflix which are more closely tied to DVD release schedules (for now). The same movies that Apple rents for $5 a pop are generally available on Netflix all-you-can-eat for a less than $10 a month subscription. So I don't see the appeal of renting from iTunes in the slightest.

    Buying video content from iTunes is completely absurd it's so overpriced. Physical media still rules the value equation, and RipIt + Handbrake gives you the same digital flexibility.

    I sincerely hope as the digital video market continues to develop that we'll start to see Apple apply downward pressure to pricing in the iTunes Video Store, but I'm not holding my breath on that.

  1. bdmarsh

    Joined: Dec 1969

    +1

    Apple rentals bigger outside the US

    most likely at least... Netflix in Canada is extremely limited content, only one out of 20 items I searched for were available. While almost everything I searched for through Apple was available.

    So for me, instead of having to go out and rent physical DVDs, I can get them cheaper through apple, without having to leave the house.

    Should netflix get the additional content here in Canada (which I do expect to happen over time, it is the Canadian studio's and such holding things up), then I likely would switch to their subscription.

    So for now Apple is getting about $15/month in rentals from me.

  1. Athens

    Joined: Dec 1969

    0

    To Expensive

    Apple is to expensive for me in Canada with movie purchases. I can get the real DVDs for a lot less and Blu-Ray movies for a lot of the content for the same price or less. Until Apple negotiates better deals with content owners for Canada its not going to do well. If the prices ever come in line with those of the US I might bite more. But between paying the same price for digital media vs physical media, I will always choose the physical media.

    The only thing that would make me deviate from that is if media content (movies and music) could be redownloaded any time, then I would pick Digital content more.

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