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http://www.nytimes.com/2008/10/30/technology/internet/30tivo.html

October 30, 2008
Netflix and TiVo to Partner on Movies
By BRAD STONE

Two of the scrappiest bantamweights in Silicon Valley, Netflix and TiVo, are expected to announce a long-awaited partnership on Thursday.

Netflix will place its Watch Instantly streaming-movie service on TiVo’s HD-compatible set-top boxes, furthering the technology industry’s goal of sending television shows and movies over the Internet — instead of over traditional cable and satellite networks — to ordinary TVs.

Netflix, based in Los Gatos, Calif., is more widely known for its DVD subscription service that mails discs in familiar red envelopes. But it has lately been expanding its digital offerings, and now has 12,000 movies and television shows that subscribers can view instantly over the Web on their PCs without charge.

Netflix and TiVo said they would begin testing the service on Thursday and expected to make it available to all owners of TiVo set-top boxes in December. There will be no extra charge for TiVo subscribers who also have one of Netflix’s unlimited subscription plans, which start at $8.99 a month.

For TiVo, based in Alviso, Calif., the partnership helps complement a growing stable of Internet content. Owners of TiVo boxes can already rent or buy films and TV shows over the Internet from Amazon.com, Walt Disney Studios and Jaman.com, a provider of independent and art films, and play them on TV.

TiVo has another component of its business as well — selling its software to cable and satellite providers, many of whom offer their own generic, lower-priced DVRs to their customers. This year, TiVo won a $104 million judgment in a patent-infringement lawsuit against Dish Networks, which should help it get better bargaining terms as it tries to get other cable and satellite operators to use its technology.

People who get TiVo’s service on a partner’s set-top box, like DirecTV’s or Comcast’s, will not have access to the Netflix video service. TiVo hopes that Internet deals like its Netflix partnership can help it sell more of its own devices, which make up only a fraction of the DVR market.

“For us this is very much aimed at new customers,” said Tom Rogers, chief executive of TiVo. “There are nine million Netflix subscribers out there who are movie lovers and who want something that really adds juice to their overall television experience.”

The deal further extends Netflix’s Watch Instantly service — the inevitable successor to its DVD-by-mail franchise. In the last year, it has signed deals to digitally deliver its catalog to high-definition Blu-ray DVD players from LG Electronics and Samsung Electronics, and to subscribers of Microsoft’s Xbox Live Internet gaming service. Netflix has also invested in Roku, a start-up that manufactures a $99 set-top box that brings Netflix’s streaming service to TVs.

Recently, Netflix has been hobbled by the economic downturn. It reported last week that it added far fewer subscribers during its third quarter than it had promised, and its stock has dropped by about 40 percent in the last month.

There is a certain irony in the partnership between TiVo and Netflix. In 2004, well before the current industry scrum over bringing digital video into people’s homes, Netflix and TiVo worked together to develop a prototype Internet film-delivery service. The effort was plagued by licensing and technology hurdles and never came to fruition.

“That was a great testament to the over-optimism of technologists like me,” said Reed Hastings, Netflix’s chief executive, recalling the earlier partnership. “The market just wasn’t ready and our ambitions got a little ahead of us. We couldn’t get enough rights to make it commercially interesting.”

Now, he said, Netflix has a growing portfolio of programs available for digital streaming and last month added a catalog of 2,500 films from the Starz cable network. “I think every idea has its time and our time is now,” Mr. Hastings said.

[WanMan]

Well, the Xbox 360 and maybe even the PS3 is as well.