LG adds Netflix to TVs in a small step with big implications

January 5, 2009

Surely hoping to jump ahead of the CES announcement blizzard that is about to strike later this week, LG and Netflix have announced that LG is releasing the first TV sets that stream Netflix titles directly to the TV, without the help of a separate box (as is the case with the myriad solutions we have already discussed on OmniVideo like Roku, Xbox 360, and even LG Blu-ray players). See Brad Stone’s piece at the New York Times for some more reporterly detail. 

This is a big deal. LG wants to do this because it needs to keep TV prices from the gutter; giving people content that they already have access to — but on the more pleasing screen known as the TV — is a great way to keep prices up.

Netflix obviously wants to do this because in its plans for world domination, offering a service that can serve you across channels (with DVDs and online streams) is a great way to provide the best of the analog and the digital worlds. Even though our own research has shown that the recession is convincing nonsubscribers that they don’t need Netflix, moves like this one certainly reassure existing subscribers that they’re getting their money’s worth.

I make a big deal out of this because of the model change that it represents for both the manufacturers and the content providers. It circumvents cable, it puts CE makers in a new role of content acquirers, and it signals a new way of looking at devices: as conduits through which many services can be delivered. I call this the “many devices, many services” model. With that paradigm in place, expect rapid innovation in products and services. Even in a recession, perhaps especially so.

However, a note of context is in order. A big question I’m hoping to answer with surveys this year is how many people will own Net-connected TVs by the end of the year. It can’t be many. If you imagine that 10% – 12% of US households buy a TV each year, it’s hard to believe that even 10% of them (1% of total) will be Internet-connected. Mostly because there aren’t that many Net-connected TVs on the market. A few from LG, Samsung, HP, Sony, with more likely to be announced this week at CES. And they haven’t sold well to date because there wasn’t much to offer through them other than walled content gardens with a smattering of swimsuit videos and re-runs of Facts of Life

Which is why the next big thing I’m waiting to hear at CES (or if not then at NAB) is a Hulu-connected TV. I’ll let you know when it happens.


It appears Netflix streaming will go HD with Xbox 360

October 29, 2008

The details are still coming together, but while I was busy at the Forrester Consumer Forum, this little tidbit came out, as trumpeted by Gigaom via the New York Times

Yes, I knew that the new UI for the Xbox 360, due out in late November, was going to feature Netflix streaming. That wasn’t news. But the interesting bit is that apparently, there will be HD movies as part of the deal. Reactions are quite positive so far, from the tweets I’m reading on Twitter. UPDATE: It appears Netflix has plans to roll this out to all its non-PC streaming platforms, not just Xbox 360 — read this post at CNET for details, including the high bandwidth requirements.

And I have to say that while this is a good move, and a relatively easy move, it’s more of a symbolic victory than anything else. For Netflix, the symbolic victory comes in being able to say it will be streaming HD quality movies to the TV not the PC (Hulu.com already streams hundreds of movies to the PC), something that cable companies charge much more for. For the Xbox 360, it will finally elevate the device’s chances of breaking through as a gaming machine to a home entertainment machine. When you add up how many people have watched video on the Xbox 360 — Microsoft says its about 30% of it’s 14 million Windows live customers, or more than 4 million people — that makes it more important than TiVo or the Apple TV in terms of the number of people it’s reaching, as I’ve said before. So going this next step makes sense.

But the move won’t push either company into new revenue or subscriber growth mode. Instead, it will confirm existing subscribers and remind them why they have already signed up in the first place. That’s always a worthwhile goal, especially in a recession, but a modest one.

It’s the long-term effect I’m interested in and I suspect that’s what Netflix is positioning for. Today, when you want to watch a movie, what are your top 5 choices? How different will that list be in two years? Maybe the better way to ask it is, where did you get the last 5 movies you watched? For me, without straining too hard to recall, it’s probably:

  1. Hulu.com streaming (watched bits of John Carpenter’s The Thing just yesterday while eating room service)
  2. Netflix by mail
  3. DVD rental from Hollywood video (it’s like, 2 mins away)
  4. Netflix streaming to Roku box
  5. Little bits of a movie my daughter was watching on ABC Family.

Here’s what’s not on my list even though I have these options: Apple TV, Xbox 360, premium movie channels, or cable VOD. What’s your five? Go on, surprise me:


Jim Keyes, Blockbuster CEO, taught me 5 things

October 28, 2008

I’ve been around the block a few times. By that I mean I have been to more than a handful of big conferences where CEOs talk about why their companies are the cat’s meow. And many times, these CEOs disappoint, falling into the role of simple cheerleader for their brands. We work hard to make sure Forrester Forums escape that pit, but it doesn’t always work.

That’s all in preamble to what I just heard from Jim Keyes, CEO of Blockbuster, who delivered. He took the stage for 45 minutes and told this audience the nitty gritty details of what it’s like to take a company many people have pronounced dead and transform it into a leader.

Jim sold me. Here are five important things I heard from Jim about the future of entertainment:

  1. One customer, many channels. Jim made a compelling case that Blockbuster is the company best positioned to have a true multi-channel entertainment offering: rental, purchase, kiosks, digital downloads, even a set top box strategy which he publicly acknolwedged but indicated would not happen this year. No competitor has the same opportunity to deliver through all possible channels to all possible devices.
  2. The over-the-top set top box business is not there yet. This is probably why Steve Jobs keeps publicly referring to the Apple TV as a “hobby.” While Jim acknowledged that Blockbuster will offer the same kind of product, when I asked him in Q&A to go in more detail, he said that these boxes are ahead of the customer right now and it doesn’t make sense to get one out there just to have one out there. He could subsidize, like he thinks Netflix is doing, but it didn’t make sense right now.
  3. Convenience is king. Putting aside for a moment that in the entertainment business, content is the real king, when it comes to the companies who want to deliver entertainment, convenient access to content is what matters. Jim discussed in great detail (including assumptions about pricing and consumer strategy that were alarmingly frank for a CEO speaking in public) about the business model implications and challenges they face in trying to make access to content convenient. Oh, and he used my Convenience Quotient model from earlier today, so of course I liked it :)
  4. Change is best when it comes from the top. One of the questions we get at every one of our events is, “how do I drive change in my organization to participate in this digital revolution?” Jim led his speech by saying he had a great opportunity if he could “inject change.” So I took the opportunity to ask him just how he planned to do that. His answer was as detailed as all his other comments, but the short of it is that he personally takes the responsibility to inject change, including communicating to every store manager each week. That way he can personally infect them with his own enthusiasm and ideas for the company’s future.
  5. You can’t get too far ahead of your headlights. Those were Jim’s words in response to me asking him the question about whether he’s actually innovating too fast by trialing kiosks and multi-channel experiences. He admitted he might be ahead of consumers just a bit, but was willing to experiment. As long as, he then confessed, that he didn’t get ahead of investors. I think that’s a lot of what is going here: Blockbuster isn’t just managing to customer’s expectations, but to Wall Street’s as well. From what I see, Jim is doing a good job of both. 

As you can see, I’m impressed by what I saw. Jim’s a guy who knows what he’s up to. If Blockbuster is going to turn itself around, I can’t imagine anyone more prepared to do it. More from the forum as it unfolds.


Samsung adds Netflix to latest Blu-ray players

October 23, 2008

We’re witnessing the one dramatic change in the world of physical media. Now Samsung has joined LG in making Blu-ray players that also stream Netflix movies and TV shows. This Netflix strategy is the little engine that could:

  • People first said it was weak because the content was so second-string. Netflix has recently fixed that by adding Starz and some Disney movies. 
  • Some complained that a dedicated $99 box from Roku (though priced to sell), wasn’t enough to move the market. However the LG Netflix/Blu-ray player showed that there was real depth to the strategy.
  • The deal with Microsoft’s Xbox 360 to put Netflix content in the game console proved there’s a true multi-platform play there.
  • Now Samsung’s entry shows that this is going to become a big deal across multiple players in the CE and computing world.

Lessee, Netflix 4, everybody else, 1.

With Steve Jobs again this week referring to the Apple TV as a “hobby” in order to downplay previous expectations, this leaves Netflix clearly in the driver’s seat when it comes to over-the-top delivery to the TV. Maybe not in volume yet, but it will.

The biggest issue here is what this means for cable. Netflix has set its sights not on Blockbuster or even on iTunes, but on Comcast, Cox, and Time Warner. The Netflix solution pulls content automatically from your DVD rental queue, provides an easier-to-use interface than VOD, and now has as much good content as a typical VOD system, this makes cable cord-cutting that much more possible.

This Netflix move could prove to be the most important wildcard of 2008. Now if only there wasn’t a recession hanging over these Blu-ray players

Are you Netflixing your TV? Will you? Do tell.


My take on how economy will affect video

October 15, 2008

As I have been promising/threatening, yesterday I completed my take on how a down economy will affect various types of video in the home. Forrester clients can read the full analysis here. 

Something I can share with everyone, client or not, is an interesting analysis I did on consumer spending on audio/video hardware. One of the questions I wanted to answer was what % of entertainment spending do affluent consumers account for. It turns out, a lot. In fact, the 45% of US households that earn more than $50K a year account for 79% of entertainment “fees and admissions” and 62% of audio/video equipment spending. That’s a lot. Interestingly, these wealthier consumer have been increasing their spending on audio/video tech less aggressively than average over the past few years. 

From the 14 October 2008 Forrester Research report, "Video Devices Vulnerable In A Down Economy"
From the 14 October 2008 Forrester Research report, 

Video Devices Vulnerable In A Down Economy

I get all of this from the Bureau of Labor Statistics’ Consumer Expenditure Survey (a datasource which, if you know how use it, can answer many of life’s most important questions, and it’s all free).

Just as Jefferson famously said that “the tree of liberty must, from time to time, be refreshed with the blood of patriots and tyrants,” it is similarly true that technology markets must, from time to time, be challenged with a lackluster economy. Not quite as big a deal, but you get my point.

Overall, the losers are new technology platforms like standalone Blu-ray and premium content subscriptions. The winners — at a very critical time for all involved, I might add — are free online video services like Hulu.com and Fancast, including Netflix’s streaming services, newly enriched with additional content. So while Netflix has warned it won’t hit 9 million subscribers as originally hoped in 2008, the millions it does have will rely on the service more than before.


Blu-ray Association optimistic about holiday sales, hmm…

October 9, 2008

As described in this short bit from PocketLint in the UK, Blu-ray Association members think Q4 is going to be great, better than expected.

The evidence is that Blu-ray titles are reportedly selling 4x better now compared to the same time last year. Lessee, a year ago, Blu-ray still had a competitor, namely HD-DVD. It still only had a relative handful of movie titles to sell. And the PS3, still the dominant Blu-ray player, was only in a few million homes. Those constraints are fading.

If we’re only selling Blu-ray discs at 4x better than last year, that’s not exactly a sign that Blu-ray has gone mainstream.

Don’t get me wrong, as I have said before, I’m a fan of Blu-ray. Menus that overlay the screen, higher resolution — I love all of it. But in a down economy, a $67.54 1080p DVD upconverter at Wal-mart is an easy choice to make over Blu-ray. In this economy, I expect Blu-ray to take a hit. Taking a hit means not growing as fast as you otherwise would have, so it’s hard to say what that translates into over time, but it certainly means that the highest-end players will sit on shelves longer, discount pricing will be more aggressive toward the end of the year, and people who have a Blu-ray player will likely favor renting over buying, even with Netflix’s $1 a month charge for unlimited Blu-ray rentals.


RealDVD can’t be sold while judge weighs options

October 6, 2008

This is only going to get uglier. Read a very intelligent post on Ars Technica covering the legal issues. The studios are claiming that even though the letter of the law is not violated, the spirit of it is.

The big issue is whether or not people can rent DVDs at Blockbuster, then copy them to a hard drive in the home. James to Hollywood: why would this be bad?

Think of this way: the rental would have been paid for. Revenue in. The copy placed on the hard drive can’t be shared, emailed, or otherwise viewed except on those computers owned by the individual that also have RealDVD installed on them. The absolute worst case for the movie industry is that someone loads up a laptop with a bunch of movies they rented so they can watch them on the road over the next few weeks. Sounds like this actually increases rental transactions because it makes me get a few extra videos while I’m in the rental store because I know I’ll be able to watch them over the next few weeks.

Who gets hurt here? Remember, people who want to rip DVDs illegally already do so with great abandon. For the rest of us who simply want a convenient way to watch movies, telling us we have no legal options only makes the illegal ones more attractive.