Netflix and TiVo Expand Their Niche

Excerpted from the Associated Press, “Netflix, TiVo Team Up After 4-Year Courtship”, by Michael Liedtke, & BusinessWeek “TiVo Does Netflix”, by Cliff Edwards, October 30, 2008 

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Netflix . and TiVo . are finally joining forces to deliver more movies and old TV episodes to their mutual subscribers, consummating a relationship that was supposed to come together four years ago.

Under the partnership , the latest generation of TiVo’s digital video recorders will be able to beam selections from 12,000 movies and TV shows offered through Netflix’s streaming service, which must be piped over high-speed Internet connections. 

TiVo ended July with 3.6 million subscribers and Netflix ended with 8.7 million subscribers. The streaming service is available at no extra charge to any Netflix subscriber paying at least $8.99 per month for DVD rentals — a prerequisite that most customers meet.

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Both companies have been moving aggressively to add more value to their services.

Netflix now has struck deals with Microsoft, Sony, Samsung, LG and Roku to deliver movies and TV shows through televisions, set-top boxes and game consoles.

TiVo, which charges a monthly or lifetime service fee, has expanded from its partnership with Amazon’s Unbox video service. In recent months, it has added CinemaNow and Jaman movie downloads and the Rhapsody movie subscription service.

Netflix is a bigger deal to TiVo because people who own the standalone box won’t have to shell out any additional cash. It might one day become an industry-changing deal if Hollywood opens the floodgates on the amount of content they license to Netflix and offers more current movies for streaming.

Most anyone who owns a TiVo will tell you how much they love it … but the service remains a niche product. Potential customers have balked at both paying for the box and monthly service. Each announcement of additional functionality helps overcome that reticence and offers another proof-point that TiVo has a lot of life left in it still.

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In addition, the growing selection of streaming devices could help boost Netflix’s profits by causing subscribers to request fewer DVDs. Each DVD rental makes a round trip through the postal service that costs Netflix 84 cents, so fewer requests will lower expenses.

Netflix still has to pay movie and TV studios licensing fees for the streaming rights, but that doesn’t cost as much as mailing DVDs.

“Netflix has really stumbled upon something that’s pretty clever  …  the customer gets the instant gratification of watching a movie over the Internet, studios get more licensing fees and Netflix saves money.”

Edit by DAF

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