"Over the past five years, Netflix’s subscriber base has quintupled while revenue more than tripled," said Brian Marshall, Gleacher & Co. analyst, in a note today. "If Apple can grow its related business similarly to Netflix’s historical growth profile, it is feasible iTunes’ annual rental revenue could exceed $1 billion by 2015."
Marshall estimates that 90 percent of iTunes TV viewings are rentals at an average selling price of 99 cents and that 75 percent of movie viewings are rentals at an average price of $2.99. Using those figures, the analyst gets a current quarterly rental revenue figure of more than $60 million.
The key to Marshall’s assumption is matching the growth rate of the juggernaut that has been Netflix, which currently has 10 times the daily rental activity of Apple. The world’s largest technology company certainly has the favored mobile devices for entertainment viewing, but has yet to burst into the living room, something it would need in order to get that Netflix-like growth.
The company may be making some progress on that front though. Apple announced last week that the revamped Apple TV would top 1 million units sold this year. The press release trumpeted the fact that iTunes users are now "renting and purchasing over 400,000 TV episodes and over 150,000 movies per day."
To be sure, $1 billion in annual revenue is not that big of a deal for Apple, considering the iPad passed the $1 billion mark in one quarter, but it is a big deal for any other tech company. Credit the Apple ecosystem of products that allows the company to jump into a new business like movie rentals and become a major player almost overnight.
That’s why Gleacher’s Marshall believes Apple shares have much more to run, even after their 54 percent climb this year. The analyst sees Apple at $355 by the end of 2011.
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John Melloy is the Executive Producer of Fast Money. Before joining CNBC, he was an editor for Bloomberg News, overseeing the U.S. Stock Market coverage team.