) plunged $27.09 (6.7%) to $378.90 on Mar 24, 2014, on the heels
of a probable
) partnership, which is expected to hurt the streaming service
provider's subscriber growth.
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Reportedly, Apple is looking for an exclusive cable line from
Comcast, which will allow it to bypass the "last mile" congestion
in the cable provider's public line. This will help Apple deliver
high quality video-on-demand and live TV through its set-top box
to Comcast customers.
Netflix recently entered into an agreement with Comcast to ensure
smooth transmission of its content, after customers complained of
declining net speed (in Comcast network) that affected the
quality of shows. Reportedly, Netflix is paying millions of
dollar to enhance the net speed through Comcast's public line.
An exclusive arrangement between Apple and Comcast will
drastically improve the viewing quality of shows for Comcast's
customers, which they will stream through Apple TV. This
improving engagement may prompt some customers to discard
Netflix's service going forward.
However, the fear that Netflix will lose substantial customer
base due to the Apple-Comcast partnership is overblown in our
view. Netflix's ever-expanding content library is its primary
strength. The company's focus on producing original shows that
increases its own content is a major positive in this regard.
Besides offering iTunes content, Apple TV also offers Netflix
along with Hulu and Google's YouTube. A possible deal with
Comcast will help Apple to sell its set-top boxes much faster.
Moreover, it can also attract Netflix subscribers who use other
set-top boxes from Roku, Microsoft and
), thus improving Apple TV's competitive position going forward.
We believe Netflix's streaming and Apple TV's set-top box are
more of complementary services rather than being substitutes.
Netflix superior content portfolio and Apple TV's undisturbed
streaming ability (post the deal with Comcast) should be
beneficial for both the companies going forward.
Currently, Netflix has a Zacks Rank #1 (Strong Buy), while Apple
has a Zacks Rank #3 (Hold).