I had an interesting conversation this week with a friend who's a CEO of a tech company in Silicon Valley. He said he was watching the Apple (NASDAQ:AAPL) WWDC keynote online and, in another window, had a real-time view of the Netflix (NASDAQ:NFLX) stock price.
The share price, he said, headed steadily downward for most of the presentation; once it became apparent that Apple was not going to introduce a Netflix competitor as had been rumored, it began to tick upward.
"It was like everyone was holding their breath and then let out a collective sigh," he said. "The idea of Apple going head-to-head with Netflix worried everybody who owns Netflix stock."
Apple's iCloud may, down the road, provide more of a challenge to online video distributors. While it doesn't automatically sync your video library between iOS devices as it does your music, it does allow you to upload them to the cloud, then to other devices, a baby step, perhaps, in a video everywhere scenario, but a step nonetheless.
But, as Giles Cottle, a senior analyst at Informa Telecoms & Media, said: "The ability to easily watch video content on any device is something the world's operators and CE manufacturers have been trying to master for years, and Apple appears to have beaten them to it."
At the moment, though, Netflix remains the big man on campus.
Its competition, such as Redbox and Blockbuster, really don't hold a candle to the video distributor. And, as Netflix continues to add subscribers to the 24 million it already has, it's going to become more difficult to find a company that can stand up to it.
Netflix, in some ways, reminds me of a drunken sailor on shore leave: happy to be where it is and happily spending pocketfuls of cash for everything, and anything it can.
When asked about Starz content possibly, which estimates put at currently costing $30 million a year, costing it $200 million a year after the current contract ends early in 2012, CEO Reed Hastings didn't bat an eyelash, saying, "That wouldn't be shocking."
I'm not sure the $350 million being floated by some rumors would surprise him a bit, either. And, the company will pay it because it has plenty of cash in its pockets, just like that sailor.
But Netflix also conjures images of a railroad baron of old, who shut out competition by buying exclusive rights of ways for his track at whatever price worked, keeping the competition at bay. I hear that train a-comin'...--Jim