On Thursday, Netflix and LG Electronics said they are joining forces to develop a set-top box for consumers to stream movies and other programming from the Internet to HDTVs -- bypassing the need to use a PC.
The collaboration is expected to yield fruit in the second half of 2008. Netflix said the partnership supports its core strategy of offering a service that gives its more than seven million members several ways to view movies and TV shows.
"Internet to the TV is a huge opportunity," Netflix CEO Reed Hastings said in a statement. He added that Netflix explored the possibility of offering its own Netflix-brand set-top box, but concluded that it would be better to offer devices from companies such as LG Electronics.
Netflix Hybrid Offering
Netflix offers a catalog of more than 90,000 titles on DVD delivered through postal mail, and a growing selection of more than 6,000 movies and TV episodes for download to PCs. When the LG product becomes available later this year, Netflix subscribers will be able to watch movies streamed from Netflix on their HDTVs.
Phil Leigh, a senior analyst at Inside Digital Media, called the Netflix-LG partnership an "interesting development." However, he said, consumers should keep in mind that the technology is not yet available.
It's customary for electronics companies to make major announcements around the Consumer Electronics Show, he noted, but because the product won't come to market until later this year, there won't be any immediate impact on the way Netflix members view their movie rentals.
Not Just LG Electronics
"Netflix has decided the LG deal isn't the only deal it is going to make," Leigh said. "LG Electronics is only one example." He added that Netflix apparently has discovered that other consumer electronics manufacturers are receptive to the idea of developing products similar to what LG and Netflix are planning.
"We can expect more of this type of collaboration. It is an indication that the movement toward Internet distribution of video to the television is gaining momentum. But it doesn't mean the dam broke today," Leigh said.
Another recent indication about Internet-delivered video is Apple's rumored deal with 20th Century Fox to partner on video-on-demand options for iTunes. Amazon last year struck a deal with TiVo to let consumers download video to TVs. The service, Unbox on TiVo, has been available since last March.
"I expect Netflix to be a contender. I was particularly encouraged that they are going to be working with a number of manufacturers," Leigh said. "Apple TV has tried to crack this. How to get Internet video directly to the television has been a difficult problem to solve. I think the more people who work on it, the better the chances the problem will get solved."