NEW YORK (
My article last week discussing why
(AAPL - Get Report) should buy
(NFLX - Get Report) caused quite a stir. Aside from eliciting anger from readers, it compelled (among others)
TheStreet columnist Rocco Pendola
to question my judgment (to put it mildly).
Aside from calling the idea "inane," Pendola argued:
"There's no good reason for Apple to get involved in the content game. It's complicated. It's expensive. It's a pain in the butt. And there's not enough of a payoff, relative to what Apple's used to, to make all the time and aggravation worthwhile."
I can offer several reasons why Apple should make this deal for Netflix. But only two reasons matter. And TheStreet's Jim Cramer agrees with them. Last year, Cramer raised the same argument.
Cramer, it should be noted, made that case in March 2013 when Netflix's stock was trading around $184, whereas now, after climbing more than 85% over the last 12 months, it trades at $352.03.
Reason No. 1: We've arrived at the point where consumers no longer need their cable and satellite boxes. This is the main reason Comcast
picked off Time Warner Cable
. They both need to survive, which was spawned in part by the growing popularity of Netflix.
In an article last year, Cramer suggested
the only way for Apple to be effective with an iTV is for cable companies to show they are willing to comply with Apple, including giving Apple access to their customers. Cramer was right.
Last week, that's what happened. Apple is reportedly in talks with Comcast to reinvent the way consumers watch television
. Reports suggest that both companies are negotiating a joint streaming-television service using Apple's set-top box, currently known as Apple TV.
As Cramer predicted, Apple is asking for some "special treatment" on Comcast's public lines. And it appears Comcast is willing comply. Apple wants a separate route for its videos and wants to make sure there will be no "last mile" congestion, the part of the transmission that reaches the customer. Apple is all about the customer experience.
We know how popular Apple is in the realm of smartphones. But we've also seen how quickly that industry has become saturated, driving Apple's margins down from their peak two years ago. Accordingly, the stock has remained under pressure. Tim Cook says he wants to reinvent TV. TV is already highly commoditized and is a low-margin business. How can this be done?