LG Electronics and Netflix Announce Plan to Stream Movies From the Internet to the TV
LOS GATOS, Calif. and ENGLEWOOD CLIFFS, N.J. /PRNewswire-FirstCall/ — Netflix Inc. (NASDAQ: NFLX), the world's largest online movie rental service, and LG Electronics, a global consumer electronics leader …
Context & Ripple Effects
Netflix, the largest online movie rental service, and LG Electronics confirmed on January 3, 2008 that they will jointly develop a set-top box that streams movies from the internet straight to the television — the first step in taking Netflix's catalog off the PC and into the living room. The New York Times had flagged the partnership the day before, and the announcement drew broad syndicated pickup across outlets on both sides of the Atlantic.
For LG, this is the latest move in a deliberate strategy of embedding partner services in its hardware: it signed a global deal with Google in March 2007 to pre-install Google services on millions of LG phones, followed by an agreement with YouTube in July 2007 to build a phone operating the video-sharing service. The Netflix box extends that playbook from handsets to the living room.
First-order effects
- Netflix gains a living-room distribution channel through LG-manufactured hardware, extending its rental model beyond DVDs-by-mail and browser-based viewing without having to build devices itself.
- LG gets a differentiated set-top product carrying Netflix's catalog, giving its consumer electronics line a content partnership its rivals' boxes lack at launch.
Second-order effects
- Other consumer electronics makers face pressure to strike equivalent streaming deals with Netflix or competing services, turning device-level content partnerships into a bidding ground for exclusivity.
- Rival rental services must answer with their own internet-to-TV delivery paths or cede the emerging set-top channel to Netflix before it hardens into a default.
Third-order effects
- If the pattern holds, televisions and set-top boxes become the contested gateway where internet video services compete for placement, shifting leverage from disc distributors toward the hardware makers who control what ships embedded.
- The disc-by-mail rental business model begins a structural migration toward bandwidth-delivered catalogs, with studios and retailers eventually repositioning around digital rights rather than physical inventory.
The trend: Consumer electronics makers and internet video services are converging through device-level partnerships, making the TV rather than the PC the endpoint for web-delivered entertainment.