) may be negotiating a deal with CBS (
), Disney (
) and News Corp (
) to stream TV shows through iTunes for 99 cents an episode,
according to a recent
This deal could help Apple challenge established streaming video
players like Netflix (
) and Hulu. Even if the negotiations succeed, however, we
don't foresee any immediate impact on
the $337 Trefis price estimate for Apple's
. Our analysis follows below.
Apple sells music, movies, eBooks and TV shows through its
iTunes store. We estimate that iTunes constitutes less than 3% of
our stock price estimate for Apple.
Currently, iTunes users can download TV shows for a fee of $1.99
to $2.99 per episode. We expect the average rent for a TV episode
on iTunes to decline during the Trefis forecast period, from $2.23
in 2009 to $1.80 by 2016. You can drag the trend-line in the chart
below to create your own average rent per episode forecast for
Apple and see how it impacts the company's share value.
Obviously, the average rental fee on iTunes could drop
significantly if Apple starts offering TV shows for 99 cents
apiece. But even if average pricing declines to $0.99 an episode by
2016, we see no meaningful impact on the company's stock.
Apple rented around 114 million TV episodes through iTunes in
2009. We expect total rentals to hit 174 million by the end of the
Trefis forecast period. Presumably, Apple could sell many
more TV shows if content producers like News Corp and Disney agree
to the lower rate.
Once again we don't see this trend moving Apple's stock,
primarily because iTunes is a relatively small business for Apple
(about 3% of the Trefis price estimate). In the next interactive
chart, you can drag the trend line to create your own forecast for
Apple's TV show unit sales and see how it impacts the company's
estimated share value.
Look out, Netflix and Hulu
Apple's move into the streaming content business could help it
challenge Netflix and Hulu, the two dominant players in the
streaming video market. Online video consumers increasingly favor
streaming, which is faster and more convenient than downloading
large video files.
In another article
, we argued that Apple's stock could suffer from the lack of a
streaming option on iTunes.
According to the Apple rumor mill, the company is
preparing a new version of the iPod Touch with a higher-resolution
screen, along with a $99 version of the Apple TV set-top box
that will include a smaller hard drive and allow users to stream
iTunes content. This announcement could come as soon as September
7, when Apple plans to hold an event in San Francisco.
You can see
the complete $337 Trefis Price estimate for
Apple's stock here.