NEW YORK ( TheStreet) -- My article last week discussing why Apple ( AAPL) should buy Netflix ( NFLX) 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 (CMCSA) picked off Time Warner Cable (TWC). 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?
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.