Is Netflix launching a movie download service? Should they?

We think they will and we think their partner should be TiVo.

Read more to find out why.

In the Netflix Q3/2006 earnings call, Netflix Chairman and CEO Reed Hastings answered the following question from Pacific Crest Analyst Chad Bartley:

Chad Bartley Question: "... I have one follow-up on the digital side. I think you have commented before. Could you talk about the pricing model for digital delivery? Do you expect to offer that under the subscription plan, or will it be something different?"

Reed Hastings Answer: "I will have to hold you off again until next quarter. Again, I know it is frustrating for us to dangle this out and not really complete the sentence, but we will complete it next quarter on this call for you."  

Amazon Unbox has proven that launching a download service with a nasty implementation of the Microsoft DRM and no set-top box makes it unusable. Netflix should learn from Amazon's stumble and partner with a set-top box company before they try to launch a download service. If Netflix really wants to hit the home theater, they need a set-top box.

We have no information to confirm this, period. But it is our opinion that Netflix should partner with TiVo on movie downloads. This isn't an original idea, it's been rumored before. However, Netflix commented on it again in an earnings call, I still believe it should be TiVo.

Why TiVo?

1. Apple is out. With Apple and their expected birth of 'iTV' focused on iTunes, they're out.

2. Cable companies won't play. With their own movies on demand, they're not going to share with Netflix.

3. Buying a company like Akimbo wouldn't give Netflix a built-in user base of any size.

4. Building and launching their own set-top box isn't their strength.

5. An integrated approach with Microsoft Media Center would be another obvious target, but would Microsoft really play? Like Apple, unlikely.

6. TiVo's hungry. TiVo needs to increase box sales as well as revenue, Netflix could be the shot in the arm that TiVo needs.

7. TiVo has enough boxes to give Netflix a reasonable initial audience – probably larger than the number of households ready to watch their computer in the home theater.

Three months from now we should have a better idea of what Netflix is planning.

What do you think? Do you think this would be a good idea? How many of you who use Netflix also have TiVo boxes. Comment below.

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AnswerMan said:

TiVo and Netflix are already partners. Google it.

October 26, 2006

gregkeene said:

AnswerMan, right you are. However, the partnership has been up and down, including some word that TiVo has moved to Blockbuster (a big mistake in my opinion). We're hoping that Netflix can win them back.

October 26, 2006

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