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2 Reasons Apple Will Buy Netflix


Rivals like Samsung (SSNLF) and Sony (SNE) already have their own smart TV strategies lined up. They claim to know what's in store for the future of television. Trying to cram mobile device functionally into TV isn't going to be enough; content is the most important aspect of television.

We know whatever TV hardware Apple designs will be stylish and hold true to the Apple brand. Even with all of the 3D, 4D or 5D capabilities, without the content no one is going to care. And consumers prefer choice. And that's what Netflix does better than anyone. Content bundle disputes seen in the cable industry support the need for an iTunes-type a la carte model. And Apple will be able to offer this with Netflix in the fold.

Reason No. 2: Consumers are watching less broadcast content in favor of social interaction about that content itself. A study by Accenture (ACN) found that 82% of consumers between the ages of 18 to 24 prefer to watch content from YouTube instead of television. It means Google (GOOG) is stealing away audiences from Comcast and Time Warner Cable.

Given Netflix's social integration with Facebook (FB), Apple can use Netflix to integrate social media with broadcast content. This is the only way for Apple to effectively disrupt the Smart TV market and bring on-board the social aspect that it lacks.

With Netflix stock closing Monday another 2%, these shares have lost 14% of their value in just over a week. Netflix is now even more affordable for Apple. (Not that price was ever an issue.) But as Netflix continues to shed market cap while projecting 48 million global subscribers for 2014, Apple's cash will be seen more and more as wasted opportunity. And it's inane that this deal hasn't happened already.

At the time of publication, the author was long AAPL and held no position in any of the other stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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