Netflix Abandons STB Ambitions, Partners with LG - First Take

Michael Gartenberg | January 02, 2008, 09:53 PM

Some pretty cool news from Netflix according to the NY Times. They're abandoning they're efforts to do their own set top box and instead will be partnering with LG to deliver their streaming service to a new device,with this being the first of other partnerships they plan to announce later. No specifics on the device and it's possible we might see this on the HD-DVD and BlueRay hybrid player. A few thoughts.

1. It's good move for them not to go the hardware route alone, that's a tough road to go down and it's better for them to partner.

2. It's good move to get the streaming service beyond the PC to the TV where consumers are going to want it.

3. The challenge will competition. With folks like Amazon Unbox/TiVo, Vudu and of course, Apple's rumored entry into the marketplace for video rentals it's going to be hard for folks in this space to differentiate from each other as well as from VOD offerings from cable providers. The Netflix brand will only go so far.

4. The device and connections are going to matter a lot here. If it is a hybrid HD player, that's going to be a huge barrier to entry just from cost alone. Much better for them to build this off of a low cost up- scaling DVD player that they can sell at much lower cost. Connections will also be critical. Getting the streaming experience to work in the living room on the TV means integration with the home network and Internet connection and that's no small challenge. Just putting an Ethernet port on the device is not enough.

Bottom line, it's a logical step for Netfilix to take but they're going to face a lot of competition for the hearts and minds of consumers. More importantly, they've got to overcome the technical hurdles that have tripped up so many players to make this viable to the mass market