Netflix and LG unite to bring movies straight to TV

Netflix Inc., the largest online DVD rental service, and electronics giant LG Electronics Inc. have decided to unite on a venture under which the two companies will develop a set-top box through which subscribers will be able to watch movies streamed directly from the Web to their TVs.

The partnership between Los Gatos, California-based Netflix and South Korean electronics company LG marks technology companies’ another effort to bring online video to the living room.

The two companies have planned to market an LG-branded device that will allow movies delivered over the Internet by Netflix to be viewed on TV screens. Netflix plans to rolls out the straight-to-TV service via an LG-networked player sometime in the second half of 2008.

Netflix’s planned movie delivery system will compliment its novel Internet movie delivery feature, announced a year ago, that lets paying subscribers to watch about 6,000 films and TV episodes on its Web site free. With the new set-top box, subscribers will be able to skip the PC and watch the movies directly on their televisions.

“We want to be integrated on every Internet-connected device, game system, high-definition DVD player and dedicated Internet set-top box,” said Netflix CEO Reed Hastings. “Eventually, as TVs have wireless connectivity built into them, we’ll integrate right into the television.”

“We think we have solved the real fundamental problem, which has been that choosing movies on a TV set has been extremely challenging,” Hastings added. “Video-on-demand companies worked at it for a long time, but choosing movies on the TV just doesn’t have the power of the Web.”

Netflix initially considered developing its own set-top box but later decided to go with LG Electronics, a major force in the American digital TV market, Hastings said. Netflix has not yet revealed the price of the set-top box, but its subscribers will be able to use the device at no extra charge. Once the device reaches the market, it will compete with cable services, and devices like the Apple TV and Vudu box, which cost $299 to $399.

Netflix's move follows a flurry of similar moves by major players in the $1.2 billion market for online DVD rentals. Late last month, reports surfaced all over the Internet that Apple Inc. is all set to forge a landmark partnership with News Corporation, under which the Cupertino, California- based Apple will make Twentieth Century Fox movies available for rent digitally through its iTunes Store.

The agreement between Apple and News Corp.'s Twentieth Century Fox will allow consumers to rent latest releases for online viewing at Apple's digital iTunes Store. The two companies are expected to announce the deal on January 14 at the Macworld conference, the reports stated.

On the other hand, Wal-Mart Stores Inc., the world's largest retailer, has pulled the plugs on its video-downloading service last week after its technical partner Hewlett-Packard discontinued the technology that supported the service.

Wal-Mart’s move came less than a year after it decided to sell digital movies and television shows on its Web site. The giant retailer had unveiled its own online digital store for downloading films and TV shows earlier this year in February.

Netflix is the world's leading DVD (Digital Video Disc) rent-by-mail company, which commands 71% of the market for DVD-by-mail rentals, with about 7 million subscribers.

Netflix shares were down 1%, to $26.35, in trading Wednesday, while Apple's stock dipped 1.6%, to $194.84.