LG to Show Off Netflix-Ready High-Def TVs at CES

Netflix (Nasdaq: NFLX) is coming to a high-definition LG Electronics television near you.

The two companies on Monday announced an extension of an existing partnership whereby LG will sell Internet-ready TVs capable of streaming content from a catalog of 12,000 Netflix movies. The service is already available on one of LG's Blu-ray disc players.

The firms will demonstrate the new high-def broadband TVs this week at the 2009 Consumer Electronics Show, the tech industry's largest annual exhibition.

Netflix stock was up 4.5 percent to US$31.23 in mid-day trading on Monday. However, that's down 23.6 percent from the stock's 52-week high of $40.90 per share.

The company's main business is its online DVD rental service. Customers order DVDs via the Netflix Web site. Netflix then mails the discs to customers, who mail them back when they're done watching them.

An Expected Move

The new agreement with LG is a reflection of Netflix's ongoing efforts to expand its consumer electronics partnerships, said Andy Hargreaves, an equity analyst with Pacific Crest Securities.

"What you're having is a proliferation of Internet-connected devices," Hargreaves told the E-Commerce Times.

Netflix already has similar partnerships with Microsoft (Nasdaq: MSFT), TiVo (Nasdaq: TIVO), Samsung and Roku that enable Netflix content to be beamed into consumers' living rooms via Internet-connected devices such as the Xbox 360 video game console and digital video recorders.

Netflix first made streaming functionality available via PCs in January 2007.

Competition Is Tight

Terms of the deal between Netflix and LG were not disclosed, so whether it's exclusive is uncertain.

"LG is a gateway to content now and they can sign partnerships with whomever they want, so it could get fairly competitive," speculated Pacific Crest's Hargreaves.

Netflix is not the only player in the game. Also on Monday, e-commerce giant Amazon.com (Nasdaq: AMZN) and Saratoga, Calif.-based Roku announced a partnership whereby consumers using the Roku set-top box will be able to instantly purchase, rent and watch content from Amazon's catalog of 40,000 movies and TV shows.

"Amazon's service is a significant one," Hargreaves said. "They're behind in the game, in that they don't have the installed base that Netflix does, but they do have a huge, huge user base."

Apple (Nasdaq: AAPL) and Marina Del Ray, Calif.-based CinemaNow are also viable competitors, he said.

Effects of Recession

Despite the widespread popularity of its service, Netflix has not been unaffected by the year-long U.S. recession.

"In general, the company is doing well relative to very low expectations," Hargreaves noted. "They've lowered their guidance. We'll have to see how much a few more months of economic malaise will affect them."

Past history shows that Netflix customers tend to be price sensitive. In a down economy, they could become more so, he said.

"When Blockbuster lowered their rental fees, that really hurt Netflix in late 2006," recalled Hargreaves. "You also see it in the fact that [Netflix's] churn is really high on a regular basis."