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The Netflix Stream's New Tributary: TiVo

By Walaika Haskins
Oct 30, 2008 2:31 PM PT

Netflix and TiVo announced Thursday the rollout of a streaming video service for subscribers. Set for availability in early December, the service appears to be the culmination of a deal the two companies originally announced in 2004.

The Netflix Stream's New Tributary: TiVo

The TiVo-Netflix venture is the latest in a series of similar partnerships Netflix has announced this year. Thus far, the movie rental company has signed on to provide streaming video content via set-top boxes built by Roku, Blu-ray players from LG and Samsung, and Microsoft's Xbox 360 gaming console.

"The more places people can consume Netflix content, the larger their potential market, so they are likely to do as many deals like this as they can. Think of this as you would mailboxes -- the more people that have them, the more people are potential Netflix clients," Rob Enderle, principal analyst at Enderle Group, told the E-Commerce Times.

For its part, TiVo has already teamed with Amazon.com through its Unbox service, as well as CinemaNow and Jaman to provide on-demand video content through its players.

Streaming Across the Screen

The Watch Instantly streaming movie service will be available to TiVo Series 3, TiVo HD and TiVo HD XL users. Testing of the service will reportedly begin Thursday. When the service officially launches in December, subscribers will be able to stream movies from Netflix's library of 12,000 movies and TV programs.

"What they are obviously looking to do is augment their existing business built on shipping physical DVDs. By working with these hardware guys, they are setting up paths to the future, where a growing number of consumers will desire not to deal with physical DVDs and go to the Roku box or TiVo and have that stream instantly available at will," Michael McGuire, a Gartner analyst, told the E-Commerce Times.

The service will be available to TiVo owners who sign up for one of Netflix's unlimited subscription rental plans, which start at US$8.99 per month. Users will be able to add movies and TV shows to their Netflix online Instant Queue. The list will automatically be displayed on the subscriber's TV and available for viewing instantly.

Doubling down on subscriptions -- one for the TiVo and another for Netflix -- will perhaps lead to bundling options from TiVo, according to Enderle.

"But this process of paying for more is supported by the cable model," he said.

It could, however, be bad news for pay TV providers, as consumers pare down their media viewing options during this economic crisis.

The offering could be enough for some cable subscribers to question whether they need channels, said McGuire.

"It could drive them to look at their bills and say, 'How much of this can I afford?' They'll be making trade-offs," he said.

Map to the Future

The deals Netflix and TiVo have struck with their partners will help the two services as people move away from physical DVDs and to digital distribution options. One possible reality, bandied about for a the past few years, is that movie studios will eventually release new movies in theaters, on DVD and the Internet simultaneously.

"Certainly this is the future both TiVo, Microsoft and the entire Cable/DSL/Satellite companies hope for," Enderle said, though he noted that questions regarding pricing and rights may take a long time to sort out. "But this is actually Netflix anticipating that people will eventually dump their DVD drives in favor of download solutions, and they don't want to disappear when this happens," Enderle noted.

It will happen if the studios see enough of an installed base and feel secure about how the content is transmitted, predicted McGuire.

"There have to be some very strong incentives for the studios to do that. The number of people doing that will have to be greater than the number with premium subscriptions," he added.

The Netflix-TiVo service will also reportedly include access to Netflix's library of about 300 high-definition films. Though that selection remains limited for now, a wide availability of HD movies will be a must if the service expects to survive.

"HD is a compelling value for consumers once they see it. That is going to be an important driver -- not in the next six months, but over time," said McGuire

Who will join Netflix's web of distributors next? Deals with Sony and Nintendo could be on Netflix's short list, followed by "any company that makes a connected TV," according to Enderle.

One casualty of the move toward streaming movies could be Blu-ray, he added.

"This continues to suggest that Blu-ray didn't penetrate deep enough in time to be a sustaining technology and that DVD in general has peaked and will drop into decline," Enderle concluded.


Rakuten Super Logistics
Is "too much screen time" really a problem?
Yes -- smartphone addiction is ruining relationships.
Yes -- but primarily due to parents' failure to regulate kids' use.
Possibly -- long-term effects on health are not yet known.
Not really -- lack of self-discipline and good judgement are the problems.
No -- angst over "screen time" is just the latest overreaction to technology.
No -- what matters is the quality of content, not the time spent viewing it.