Featured Partner

Why Netflix Won’t Be Part of Apple’s New TV App

The Motley Fool Contributor
Font Size:

Apple Tv App
Image source: Apple.

The new TV app from Apple (NASDAQ: AAPL) is a great content aggregator. It collects all of the various video content consumers have access to through iTunes downloads, stand-alone streaming services, and on-demand streaming services that use pay-TV credentials. But there are a couple of major omissions: Netflix (NASDAQ: NFLX) and Amazon.com (NASDAQ: AMZN).

Those omissions have led many people to criticize the app, since at least 50 million Americans watch some of their television through Netflix or Amazon Prime Instant Video. That severely limits Apple’s new app in its ability to find and recommend the best content for each user. What’s more, it’s unlikely Netflix will ever sign on.

Netflix gets a lot of value out of controlling its user experience

The big issue with Apple’s TV app, from Netflix’s standpoint, is that it cedes control of the user experience to Apple. That could be good for stand-alone networks and online pay-TV streaming portals, which generally have poor user interfaces and low adoption. But for Netflix, which has a quality user interface and strong adoption, it’s unnecessary and even detrimental to its business.

Most egregiously, Apple would take over the content recommendation from Netflix, something Netflix relies on to improve watch time and churn. Earlier this year, Netflix published a paper claiming its recommendation engine saves the company $1 billion per year. “When produced and used correctly,” the authors say, “recommendations lead to meaningful increases in overall engagement with the product (e.g., streaming hours) and lower subscription cancellations rates.”

Additionally, the TV app removes a lot of branding from the user interface. That could have a negative impact on churn for a service like Netflix or Amazon Prime Instant Video. If it’s more unclear where this content is coming from, it’s harder for users to justify $10 a month for one of those services.

Overall, it’s more likely services with a strong brand and user interface such as Netflix or Amazon will see a negative impact from Apple’s TV app than the potential positives.

Netflix wants its data all to itself

On top of the potential detriments to Netflix’s user experience, Netflix’s participation in the TV app would open up a lot of its data to Apple. Netflix is historically very private about its viewer data, as is Amazon. It won’t even share its data with the people responsible for creating its original content.

Netflix’s viewer data is one of its biggest competitive advantages. It lets it spend its content budget effectively and efficiently. It’s also one of the reasons its original series have managed to become so popular.

With Apple’s increasing interest in producing original video content — starting with Apple Music exclusives — Netflix’s viewer data would be immensely valuable. On the flip side, for Netflix to let its data fall into the hands of Apple could give rise to another big competitor.

Even if the adoption rate of Apple’s TV app remains relatively low, Netflix’s participation would probably generate a significant increase in adoption. As a result, evaluating the impact of Netflix’s inclusion is difficult. Management is best off staying on the sidelines and focusing on drawing consumers to its app. Giving up control of both its user experience and data is too risky, given the huge benefits each provide Netflix.

10 stocks we like better than Netflix
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now… and Netflix wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of November 7, 2016

Adam Levy owns shares of Amazon.com and Apple. The Motley Fool owns shares of and recommends Amazon.com, Apple, and Netflix. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Members of the editorial and news staff of the Daily Caller were not involved in the creation of this content.

The Motley Fool

PREMIUM ARTICLE: Subscribe To Keep Reading

Sign up

By subscribing you agree to our Terms of Use

You're signed up!

Sign up

By subscribing you agree to our Terms of Use

You're signed up!
Sign up

By subscribing you agree to our Terms of Use

You're signed up!

Sign up

By subscribing you agree to our Terms of Use

You're signed up!
Sign up

By subscribing you agree to our Terms of Use

You're signed up!

Sign Up

By subscribing you agree to our Terms of Use

You're signed up!
Sign up

By subscribing you agree to our Terms of Use

You're signed up!
Sign up

By subscribing you agree to our Terms of Use

You're signed up!
BENEFITS READERS PASS PATRIOTS FOUNDERS
Daily and Breaking Newsletters
Daily Caller Shows
Ad Free Experience
Exclusive Articles
Custom Newsletters
Editor Daily Rundown
Behind The Scenes Coverage
Award Winning Documentaries
Patriot War Room
Patriot Live Chat
Exclusive Events
Gold Membership Card
Tucker Mug

What does Founders Club include?

Tucker Mug and Membership Card
Founders

Readers,

Instead of sucking up to the political and corporate powers that dominate America, The Daily Caller is fighting for you — our readers. We humbly ask you to consider joining us in this fight.

Now that millions of readers are rejecting the increasingly biased and even corrupt corporate media and joining us daily, there are powerful forces lined up to stop us: the old guard of the news media hopes to marginalize us; the big corporate ad agencies want to deprive us of revenue and put us out of business; senators threaten to have our reporters arrested for asking simple questions; the big tech platforms want to limit our ability to communicate with you; and the political party establishments feel threatened by our independence.

We don't complain -- we can't stand complainers -- but we do call it how we see it. We have a fight on our hands, and it's intense. We need your help to smash through the big tech, big media and big government blockade.

We're the insurgent outsiders for a reason: our deep-dive investigations hold the powerful to account. Our original videos undermine their narratives on a daily basis. Even our insistence on having fun infuriates them -- because we won’t bend the knee to political correctness.

One reason we stand apart is because we are not afraid to say we love America. We love her with every fiber of our being, and we think she's worth saving from today’s craziness.

Help us save her.

A second reason we stand out is the sheer number of honest responsible reporters we have helped train. We have trained so many solid reporters that they now hold prominent positions at publications across the political spectrum. Hear a rare reasonable voice at a place like CNN? There’s a good chance they were trained at Daily Caller. Same goes for the numerous Daily Caller alumni dominating the news coverage at outlets such as Fox News, Newsmax, Daily Wire and many others.

Simply put, America needs solid reporters fighting to tell the truth or we will never have honest elections or a fair system. We are working tirelessly to make that happen and we are making a difference.

Since 2010, The Daily Caller has grown immensely. We're in the halls of Congress. We're in the Oval Office. And we're in up to 20 million homes every single month. That's 20 million Americans like you who are impossible to ignore.

We can overcome the forces lined up against all of us. This is an important mission but we can’t do it unless you — the everyday Americans forgotten by the establishment — have our back.

Please consider becoming a Daily Caller Patriot today, and help us keep doing work that holds politicians, corporations and other leaders accountable. Help us thumb our noses at political correctness. Help us train a new generation of news reporters who will actually tell the truth. And help us remind Americans everywhere that there are millions of us who remain clear-eyed about our country's greatness.

In return for membership, Daily Caller Patriots will be able to read The Daily Caller without any of the ads that we have long used to support our mission. We know the ads drive you crazy. They drive us crazy too. But we need revenue to keep the fight going. If you join us, we will cut out the ads for you and put every Lincoln-headed cent we earn into amplifying our voice, training even more solid reporters, and giving you the ad-free experience and lightning fast website you deserve.

Patriots will also be eligible for Patriots Only content, newsletters, chats and live events with our reporters and editors. It's simple: welcome us into your lives, and we'll welcome you into ours.

We can save America together.

Become a Daily Caller Patriot today.

Signature

Neil Patel