Sales of movies and TV shows have not proved to be quite as rampantly successful as Apple might have hoped. The iTunes Store has been offering video content since 2006, but you’ll notice that the company rarely talks about the number of movies and TV shows that it delivers, instead focusing on the thriving sales of songs and apps. If nothing else, that should be an indication that video is not exactly a cornerstone of the company’s business. Meanwhile, companies like Netflix and Hulu have been attracting plenty of consumer attention (if not always profits to match).
(Image Caption: Hulu's streaming TV service has proved popular.)
Hulu would give Apple a strong position in the burgeoning streaming video business—the question is whether or not that’s a business Apple wants to be in. The Apple TV—specifically the most recent version, which places an emphasis on streaming over storage—suggests it does. While the company has continually described its own foray into the living room as a “hobby,” chief operating officer Tim Cook recently said that the company would continue investing in the device because it thinks there’s something there. But clearly, reading between the lines of Cook’s comment, it’s not all there yet.
Some have suggested that Apple’s purposes might be just as well served by a deal streaming Hulu to the Apple TV, as Apple has done with Netflix. At a base level, that certainly might appease existing Hulu Plus subscribers—yours truly included—but there’s the risk that Apple might cannibalize its own video sales without necessarily driving enough Apple TV adoption to compensate. Owning Hulu would instead give Apple the power to shape the service to its own needs.
Not just a river in Egypt
From a business strategy point of view, you can’t ignore that there’s not only power in buying an established property, but also in denying it to your rivals. Apple snapping up Hulu prevents the company’s other potential suitors—Google, Yahoo, AT&T, and so on—from getting an instant leg-up in the video market.