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Netflix has teamed up with Silicon Valley startup Roku to bring their subscribers a set-top box to rival Apple TV. The DVD home delivery company will expand their current “Watch Instantly” services through Roku’s Netflix Player in an attempt to compete not only with Apple, but also with the major cable providers. Users will be able to watch any movie in their online library for free by using the $99 box, as long as they maintain a subscription worth at least $8.99 a month (unlimited DVDs). The announcement is making a splash in the technology industry, and experts are predicting that cable companies and other set-top boxes will follow Netflix’s lead.

Roku was founded in 2002 in Saratoga, CA, and they have also worked on an internet radio player. They collaborated with Netflix to make the new player easy-to-use and fully-integrated with Netflix’s “Watch Instantly” service. The idea was to make the existing library available through a separate device so subscribers don’t have to go through the hassle of connecting a home computer to their TV sets. As Roku founder Anthony Wood said in a recent press release, “Now, streaming video isn’t limited to people sitting in front of the PC; it’s ready for the TV in the living room.”

Chairman and CEO of Netflix Reed Hastings explains the benefits of the new device: “”First, it allows consumers to use the full power of the Netflix Web site to choose movies for their instant Queue, and then automatically displays only those choices on the TV screen. That’s a major improvement versus the clutter of trying to choose from 10,000 films on the TV. Second, there are no extra charges and no viewing restrictions. For a one-time purchase of $99, Netflix members can watch as much as they want and as often as they want without paying more or impacting the number of DVDs they receive.” Not only does it straddle the line between convenience and cost, but it also has the flexibility that users need to make it work with their existing AV equipment. Roku boasts that it connects with 100% of TVs retailed in the U.S., and it has ports for RCA, S-video, component video, HDMI, and optical audio, as well as Ethernet or Wi-Fi.

The element of this deal getting the most media attention is, of course, the price. Most Netflix subscribers already have plans that enable them to use the player for free, and the $99 price tag for the box pales in comparison to Apple’s $229 rival. As a TechCrunch article points out, “Instead of wading into a losing battle over cheap downloads and rentals (see Vudu, BlockBuster, AppleTV, Google, etc., which charge for each movie), they jump right to free. They know what the consumer wants.” A Gartner analyst told the New York Times, “A $99 price tag is very attractive, [but] in the end, it all comes down to content.”

So what about the content? The “Watch Instantly” library on Netflix current has around 10,000 titles, many of which are older due to licensing agreements with Hollywood studios and distributors. For example, classic TV shows like Quantum Leap and Magnum P.I. are available, though newer shows like Lost or 24 are only available on DVD. That being said, the library is still much larger than that offered on demand by my cable provider (Comcast), and it’s far more diverse. It’s likely that the announcement of Roku’s Netflix Player will inspire Comcast and others to beef up their offerings, expecially their free content.

While Netflix is said to be pouring money into their “Watch Instantly” service rather than raking it in, this new means of enjoying Netflix content might help turn the tables. Upgrading current customers and attracting new ones may help defray the costs of licensing films and streaming them to homes around the country. As their subscription numbers continue to grow, Netflix is poised to inspire both new technology and new content offerings from cable providers and consumer electronics companies.

Tuesday, May 20th, 2008 You can skip to the end and leave a response. Pinging is currently not allowed.

By Haley January Eckels