TiVo Inks Deal with Netflix

The rumors were true. TiVo, Inc. and Netflix, Inc. are teaming up to deliver movies on demand over the Internet beginning next year, according to announcements made September 30.

The two Silicon Valley companies are natural partners to do something that technology pundits have long predicted would be an inevitable development in the evolution of home entertainment. Alviso, CA–based TiVo was one of the first companies to adapt hard disk drives as recording devices for capturing television programming; Los Gatos–based Netflix was among the handful of companies to emerge from the dot-com era with a solid, sustainable, and growing business. The DVD-rental firm now has approximately two million subscribers, as does TiVo. In the public mind, the names of both companies are synonymous with their respective industries.

The new venture will leverage increasingly available broadband Internet connections to allow users to download movies directly to web-enabled TiVo boxes, using technology developed by Strangeberry, Inc, now a division of TiVo. Netflix already has more than 25,000 titles in its catalog and claims to be working with the film industry to license them for download.

The partners also plan to deliver sports and other programming, providing a fourth channel of TV distribution, the others being over-the-air broadcasting, cable, and satellite. TiVo CEO Mike Ramsey told reporters that he hopes the new service will be able to offer programming that can't find a home among the dominant broadcast networks. Ramsey said he would resign his position on Netflix's board of directors to avoid any potential conflict of interest. No estimate was given of the cost to subscribers of the new service. TiVo currently costs $12.99/month; Netflix charges $21.99/month for rentals with no due date and no late fees.

Akimbo Systems, Inc., a company known primarily for obscure video programming, has also announced its intentions to provide a fuller range of programming via the Internet for $9.99/month. Not coincidentally, on October 1, Hollywood Entertainment Corporation, announced that it has saw an 8% drop in video rentals during the third fiscal quarter at stores open at least a year. The Wilsonville, OR–based company's Hollywood Video stores are the nation's second largest video rental chain after Blockbuster, Inc., which has made moves over the past year to reinvent its business model in the face of growing competition from rental services like Netflix and from the increasing desire of movie fans to purchase their favorite titles rather than rent.