This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Is Apple Entering the Streaming Video Market?

Apple (AAPL) may be negotiating a deal with CBS (CBS), Disney (DIS) and News Corp (NWS) to stream TV shows through iTunes for 99 cents an episode, according to a recent Bloomberg report.

This deal could help Apple challenge established streaming video players like Netflix (NFLX) and Hulu. Even if the negotiations succeed, however, we don't foresee any immediate impact on the $337 Trefis price estimate for Apple's stock. Our analysis follows below.

Apple unpeeled

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 Sept. 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.

Like our charts? Embed them in your own posts using the Trefis Wordpress Plugin.

Trefis is a financial community structured around trends, forecasts and insights related to some of the most popular stocks in the U.S.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,156.85 +24.88 0.15%
S&P 500 2,001.57 +2.59 0.13%
NASDAQ 4,562.1890 +9.43 0.21%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs