Netflix box will bring Internet video to HDTVs
SAN FRANCISCO -- Online video-rental service Netflix nflx and giant LG Electronics on Wednesday said they will develop a set-top box that lets consumers stream video content from the Internet to high-definition TVs.
The straight-to-TV service, due in the second half of this year, would be the most direct way yet for Netflix's 7 million members to view movies and TV series. For a year, Netflix users have been able to stream content to their PCs. They can also rent videos from Netflix's website, for home delivery of DVDs.
"The potential is huge over the next 10 years," as millions of Americans snap up HDTVs and increasingly pipe Internet content straight to them, says Netflix CEO Reed Hastings.
Hastings said Netflix considered building its own set-top box but decided to go with LG Electronics, a major force in the U.S. digital TV market. He said the set-top box's price has yet to be determined.
Netflix's announcement caps a flurry of moves by key players in the $1.2 billion market for online DVD rentals.
On Dec. 21, Wal-Mart Stores wmt shuttered its online movie download service after less than a year. Wal-Mart continues to sell DVDs and CDs at retail stores and over the Internet for shipping by mail.
Last week, Apple aapl declined to comment on reports in The Financial Times, The Wall Street Journal and Associated Press that it is entering into a new video-on-demand deal with News Corp.'s nws 20th Century Fox studio. USA TODAY was unable to confirm those reports. Fox movies would be available for rental on Apple's iTunes for $2.99, according to The Financial Times. It is unclear whether content would be streamed or downloaded to Apple-made devices, such as Apple TV, iPods and Macintosh computers.
"This could shape up to be a boxing match between Apple and Netflix over video streaming content to TVs and PCs," says Michael Olson, an analyst at Piper Jaffray.
For Netflix's set-top box to succeed, it needs to cost about $100, with a monthly subscription rate of $12 for rentals of two to three titles at a time, Olson says.
Netflix commands 71% of the market for DVD-by-mail rentals, says Olson. But he says it is keenly aware that the rental market is increasingly moving toward computer downloads and streaming as more consumers get ultra-fast broadband Internet connections and digital TVs.
Another player in this emerging market is Amazon.com amzn, whose partnership with TiVo tivo lets consumers download video to TVs. The Unbox on TiVo service has been available since last March.
Netflix shares dipped 1%, to $26.35, in trading Wednesday. Apple's stock was down 1.6%, to $194.84. Amazon shares jumped 4%, to $96.25.