Should Apple Give Away the Apple TV to Kick Start a Streaming Video Service?

Apple tv streaming business

Amazon’s foray into the video streaming business proves not only how much demand there is by consumers, but also how lucrative streaming can be. Amazon’s not the only one jumping on the bandwagon to compete with Netflix, a lot of the cable and satellite industry heavyweights have announced plans to release apps and services to stream existing digital libraries to customers  as a free added service and in some cases for an additional fee, looks like Netflix may be headed downstream if they don’t find a way to build out their streaming content library and fight concessions from media owners.

Apple, with its massive user base, studio connections, and an established payment and distribution network has a great opportunity to leverage these advantages to create a subscription based video streaming service that would compete with Netflix and others.  Apple would only have to negotiate with content providers, expand their streaming infrastructureThe only thing Apple needs to do is expand their media distribution network to handle the streaming load and persuade content providers to provide them with licensing rights to distribute their content à la Netflix.

Apple’s biggest challenge will be ensuring that they don’t subcumb to anti-competitive measures that would put Netflix, Hulu, and other streaming services that work on their devices at a disadvantage, that is charge a 30% fee for in-app subscriptions or to limit the content provider’s functionality in any way, shape or form.

The other challenge facing Apple is making the service as ubiquitous as Netflix has become, in other words, Apple’s service needs to be available in TV Apps, Xbox, Playstation, the Android Platform, and others. They need to take Amazon’s Kindle approach and ensure that they are on every screen possible. Of course, knowing that Apple likes to keep their goodies within their ecosystem can hinder this possibility.

This brings me to the final point about Apple’s ability to dominate this industry, a free Apple TV per household. If Apple would give away free Apple TV’s and only require that the customer sign up for a 6-12 month contract for the service, I think it would work. The initial contract would be in place to mitigate any losses associated with people trying to get a free Apple TV. If Apple brings the App store to the Apple TV then there would be an opportunity to make money on that in addition to the subscription service.

I think that if Apple entered the subscription based video streaming business using this approach, they would become a formidable competitor to most streaming providers in the market. What do you think? Should Apple pursue this business? Your thoughts are welcome.