We’ve all heard by now that Apple (NASDAQ:AAPL) is in a deal with News Corp’s (NYSE: NWS) Fox for a movie rental download deal.  Apple is Since Apple TV is still referred to as a "hobby" rather than a solid business line, this deal won’t likely be a huge winner for Apple in the grand scheme of things.  Disney (NYSE: DIS) has had its catalog available on iTunes to allow for purchases, and other studios have partial movie and partial video content catalogs already available.  Maybe the rental feature will be better than the "buy it" feature, but we really doubt this will be a huge financial impact. 

But Blockbuster (NYSE: BBI) and Netflix (NASDAQ:NFLX) may at least on the surface be a potential spot for worries.  These may sell off on the news initially, but this won’t likely be a killer of those operations even if this allows users to rip and burn to PC’s or iPods.

Blockbuster (NYSE: BBI) has been nipped in the heels for years now by competition and by web programs like Netflix that has been a better operation.  Blockbuster’s online video rental program hasn’t been the success that Netflix’s has been.  But it’s hard to imagine that Steve Jobs’ latest ink signing deal is going to keep anyone out of a video rental store that still goes there now.   Blockbuster shares are up 10% from last week after the company raised its prices for its Total Access service.

We’ve already noted that the Apple deal may be a waste of time in the grand scheme of things.  Many Netflix loyalists are also iPod owners.  Maybe Netflix is a bit worried about this, but it just doesn’t seem like this will sway  its loyalists away.  So even though the logic trail seems an obvious one, it may be an exercise in futility.

This will take some time to take hold under any circumstances, so even if Apple manages to make this a success this wouldn’t be a real threat until maybe later in 2008 or even 2009.  First Call has the Netflix estimate for fiscal 2008 revenues at $1.31 Billion, and it has revenue projections for Blockbuster’s fiscal December 2008 pegged at over $5 Billion.  First Call has Apple’s fiscal September 2008 sales projections north of $31 Billion.

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Jon C. Ogg
December 27, 2007

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