LG Electronics Device To Deliver Movies Online

LG Electronics Inc. will soon offer video streamed from Netflix.

originally posted in Wall Street Journal

NICK WINGFIELD - July 31, 2008

South Korea's LG Electronics Inc. will soon offer a device that plays high definition Blu-ray movies along with video streamed over the Internet from Netflix Inc., the latest move by Netflix to deliver movie rentals online rather than through the mail.

The new product, dubbed the LG BD300 Network Blu-ray Disc Player, will go on sale in the U.S. in September for "well under $500," according to Allan Jason, vice president of sales and marketing for digital media products at LG's U.S. division. In addition to playing movies in the high-definition Blu-ray format being pitched as a successor to DVDs, the product will have a jack on the back for plugging into a home network. Movies can be accessed from Netflix and other forms of programming from other sources.

Netflix and LG first announced a partnership in January, but they hadn't discussed a specific product.

The LG product is part of a wave of electronics devices from Apple Inc., Microsoft Corp. and others enabling video delivered over the Internet to make the leap to televisions from personal computers. The growing online availability of TV shows, movies and other mainstream programming could eventually pose a challenge to more traditional delivery of television through cable and satellite.

Best known for using red envelopes to mail DVD rentals to homes, Netflix, of Los Gatos, Calif., has cut a series of deals recently to stream movies over the Internet to TVs, a method that begins playing movies almost immediately and doesn't make permanent copies of videos for users to keep. The company recently announced plans to stream movies to Microsoft's Xbox 360 videogame console later this year, and since May has been doing the same through a $100 set-top box made by Roku Inc.

Netflix's Internet-streaming service from these and the LG product will be available at no additional charge to subscribers to Netflix's DVD-rental service, as long as customers are on rental plans that cost at least $8.99 a month. The picture quality of streamed movies is comparable with a DVD, though will fall short of the superior images that users of the LG product will get from Blu-ray disc movies. Reed Hastings, chairman and CEO of Netflix, believes users will accept the lower quality in exchange for instant gratification over the Internet.

"The most appealing part of it is the instant you click you get to watch," Mr. Hastings said.

The other big drawback of the Netflix streaming service is that only 12,000 titles out of a total library of more than 100,000 on DVD are available over the Internet, due to restrictions by movie studios. Josh Martin, an analyst at research firm Yankee Group, said the better selection of movies on disc formats compared with the Internet is likely to continue for years to come.

"The technology is already there but the business models are not," Mr. Martin said.

originally posted in: http://online.wsj.com/article/SB121747437464399925.html?mod=hps_us_at_glance_technology

On-Demand big in Warner's corner

Studio aims to lure millions more to VOD
originally posted in Variety

By John Dempsey

The numbers couldn't be more stark: Movie sales and rentals on DVD generated $23 billion last year in the U.S. compared with only $1 billion or so from pay-per-view.

But Warner Bros., enticed by lucrative revenue splits and the chance to boost the revenues of Time Warner Cable, is hell-bent on luring millions more to video on demand, either through their cable box or Internet services such as Apple's iTunes Store.

The studio, like its rivals, also wants to fend off piracy by making its movies easily accessible through legal means. To that end, Warners has compressed the PPV-VOD window on most of its movies, making them available the same day that each movie's DVD hits the retail stores. So far, no other major studio has followed suit. (...) Andy Millett, senior VP of digital distribution for the studio, doesn't deny that Time Warner Cable will benefit from a big leap in buy rates, but says Warners devised the day-and-date strategy to help all cable operators.

He calls cable VOD "a sleeping giant" and points to the potential revenue bonanza: The studio keeps 70% of every VOD rental compared to a paltry 30% or so for each disc rental.

The five other majors are aware of the favorable split, which is one reason why four of them -- Disney, Paramount, Fox and Universal -- are continuing their 18-month-long day-and-date test with Comcast Corp., the biggest cable op in the country. Comcast has set aside its cable systems in Pittsburgh, Atlanta and Denver for the test. Sony has taken a pass because it's convinced the $4.99 rental price of each title should be a couple of bucks higher.

These Comcast experiments may not cause other studios to follow the Warner Bros. blueprint, but the tryouts are likely to stay in place because of an ongoing industry nightmare: Too many people are using illegal file-sharing to download movies off the Internet without paying for them. (...)

But Millett says his studio competitors are being unduly cautious. "In our tests with Comcast and (research firm) Frank N. Magid Associates," Millett says, "we found that day-and-date PPV has had little negative impact on rental of DVDs" in the stores and through subscription outlets like Netflix.

In the early results of Warners' go-it-alone strategy, the studio has chalked up gains of between 30% and 60%, depending on the title, he says. With no competition from his major-studio rivals, Millett says Warners' market share of the day-and-date PPV business has shot up by 40%. (...)

In Woodward's analysis, the rental and sale of the physical DVD will continue to easily be the most profitable window for the average theatrical movie. But the vidtailer is still trying to become a major player in electronic sell-through and rental; it recently bought Movielink, a digital platform once backed by the majors, and integrated it with Blockbuster.com. "Our goal is to follow what the consumer wants to do, no matter what the platform," she says. (...)

Adams says the studios can pocket as much as $17 dollars from the sale of one DVD. And the six majors and a few other movie companies, he adds, will harvest $15.50 from each movie download sold through Apple's iTunes Store the same day that the DVDs go on sale. (...)

The stores argue that the manufacturing and shipping cost of physical discs is modest considering that "DVDs have generated the greatest windfall of profits in Hollywood history," says John Marmaduke, chairman and CEO of Hastings Entertainment, a chain of retail stores spread throughout 21 states. "To jeopardize those profits with the unfulfilled promise of VOD would be extremely reckless."

Millett doesn't think DVD profits are in danger, citing the millions that Warners is spending in marketing a movie to run simultaneously on VOD and in DVD. "All of these promotional dollars," he says, "make a larger number of people more aware of a movie's availability."

That awareness "will also drive the sale of the DVD," he argues. Warners does not make major tentpoles such as "Harry Potter," and "I Am Legend" available day and date "because these pictures already have tremendous awareness." (...)

Millet's goal is to keep the money rolling on all fronts.

Read the full article at: http://www.variety.com/article/VR1117989499.htmlarticle/VR1117989499.html