Apple-Comcast TV Service Rumor Drives Down Netflix Shares
Netflix (NASDAQ:NFLX) shares slumped over 6 percent today after an unconfirmed report from The Wall Street Journal suggested that Apple (NASDAQ:AAPL) is in talks with Comcast (NASDAQ:CMCSA) over the possibility of creating a streaming-television service that would work through Apple’s TV set-top box. The Wall Street Journal’s report was based on unnamed “people familiar with the matter.”
Although the sources noted that the talks were only in the early phase and that there were still many obstacles that must be overcome to complete the deal, investors apparently felt that the prospect of an alliance between Apple and Comcast was too much of a threat to Netflix’s business. However, even if Apple and Comcast reached a deal, it is unclear how the proposed streaming-television service would affect Netflix’s own video service.
“Folks don’t understand the Comcast-Apple box and somehow think that because someone changes their set top that they would cancel Netflix for a service that does not even exist,” observed Janney Montgomery Scott analyst Tony Wible via the Financial Times. According to the company’s earnings report, Netflix finished 2013 with 44 million subscribers, including many users who access the service through the current iteration of the Apple TV product.
However, some investors may have been spooked by the idea of a streaming-television service that could potentially be of a higher quality than Netflix’s service. As noted by The Wall Street Journal’s sources, Apple’s video streams would travel on a separate, less-congested part of the network during the final leg of its journey to customers’ homes.