SEATTLE—(BUSINESS WIRE)—Jan. 5, 2009—Amazon.com, Inc. (NASDAQ: AMZN) today announced that it will offer customers the ability to instantly purchase, rent and watch digital movies and TV episodes from its popular video service, Amazon Video On Demand, via the Roku Digital Video Player. Beginning in early 2009, the Roku Player, which currently supports only the Netflix service Read More...

It appears as if 2009 may be shaping up as a defining year for broadbandTV – which we define as Internet streaming of video directly to the TV (with or without a STB). There’s been a flurry of activity in the past couple months with, NetFlix, Vudu, and Hulu all getting their fare share of news. Recent interesting news involves Netflix and LG announcing that LG televisions will embed NetFlix players on forthcoming TV’s, allowing LG customers to download NetFlix content directly to the TV, without the need for an external set-top-box or computer. With CES kicking off later this week, we expect to hear similar announcements from other broadbandTV players.

BroadbandTV or 'over-the-top' video has been building significant momentum for the past year or so. So much so, we can now extend 'cutting the cord' vulnerability to subscription pay TV, where consumers decide they don’t need a cable/IPTV/DBS monthly subscription, and instead opt for broadbandTV exclusively. The economic downturn fuels this vulnerability, as consumers look for ways to cut monthly expenditures. We would agree that 2009 is looking like an important milestone in the adoption of broadbandTV – but don’t foresee any material threat to the subscription pay TV model anytime soon.

Two significant hurdles remain before broadbandTV puts a serious dent in the subscription model – revenue and confusion. First, we must recognize that despite the press that broadbandTV endears, the subscription model still reigns supreme to the people that count the most in this debate – content owners. They rake in billions in revenue annually from the subscription model. They will not trade those subscription pay TV 'dollars' for broadbandTV 'dimes' anytime soon, despite the appeal of going direct to consumers. Can you blame them? There’s a reason why Hollywood moves slowly with new technology – they're too busy counting money. Secondly, while broadbandTV is 'cool' to industry analysts and consumer geeks, to the vast majority of mainstream consumers, it’s still too confusing. Disagree – try explaining this phenomenon and its ‘value proposition’ to your wife who may be a school teacher, or your brother who is a fireman, and then convince them to give up Lifetime and/or the Sunday NFL Ticket for it. Good luck. That being said, LG and NetFlix are on the right course. BroadbandTV won’t be accepted by a sufficient number of consumers to have an impact on the pay TV model until such time that it’s idiot proof and doesn’t need an explanations of how to make it work and why it’s valuable. We’ll see significant momentum in 2009, with more 'blue chip' partnerships put in place that help achieve this goal. If anything, 2009 may awaken pay TV operators to figure out how/if they can dominate a broadbandTV world. Can they?

ALVISO, Calif. - December 8, 2008 — After announcing a groundbreaking partnership in October with Netflix Inc., TiVo Inc. (NASDAQ: TIVO), the creator of and a leader in television services for digital video recorders (DVRs), today announced that subscribers to both Netflix and TiVo® Series3, TiVo HD, or TiVo HD XL can now access thousands of movies and TV episodes instantly streamed from Netflix directly to their TVs. Read More ...

Microsoft announced today at the E3 Expo that Xbox 360 Gold members will be able to download movies from Netflix to their game console (and hence their TV) for no additional charge. Subscribers also have to be Netflix subscribers. Netflix makes about 10,000 titles, which includes movies and television shows, available for direct download. The move continues the trend by Microsoft to position the Xbox 360 game console as an entertainment gateway, featuring gaming, video downloading, music, and social networking applications. The new Netflix feature will be available this fall. Microsoft competitor, Sony announced earlier this month that they are bringing video download options to the Playstation 3.

Apple unveiled a new video download strategy at the MacWorld Expo. The video download service builds on the Apple TV product, which has not seen nearly the success of its iPod and iPhone cousins. The new download options include 30 day rental of movies from all the major motion picture studios. The download service allows video playback on computers, iPods or iPhones for $3.99 ($2.99 for older titles) for a 30 day period. Viewers can also use the Apple TV set top box to download content direct to their TV. Apple joins a flurry of video download options. Netflix, in anticipation of Apple’s move, announced unlimited downloading of movies and TV shows to PCs for $9/month. Wal-Mart is also looking for a solution. And Amazon Unbox is a player in the video download space as well.

All of these players are trying to carve a niche out of the burgeoning video download business. Many bets are being placed on the Internet becoming a rival consumer distribution channel to traditional cable, DBS, and IPTV. Truthfully, the lines are blurring here. Some days you can’t tell the difference. The real issue may not be about Internet versus traditional distribution, but rather, consumer electronic and content partnerships versus traditional multichannel video operators. Both camps are busily building a model to deliver an entertainment experience that they hope will win consumers over. Can they co-exist? Maybe. They both have their own unique strengths. They will both continue to bring innovation to the marketplace and thus intensify the competitive landscape.

Netflix and LG announced a partnership to develop and market a set top box that downloads content direct to the TV. This solution removes the need for a PC and joins similar efforts from Amazon/TiVo. The service is expected to be available this fall. The set top box solution will be HDTV compatible, but the announcement was not clear as to whether the downloads will be in HD. Netflix currently has 7 million subscribers, most of whom rent from Netflix’s 90,000 DVD titles via the U.S. mail. In addition, Netflix reports about 1 million members take advantage of their existing PC download service which offers about 6,000 titles. There have also been recent rumors that Apple will announce a similar strategy later this month.

Direct to TV downloads is a growing phenomenon – one that may have serious competitive implications for triple play providers. The jury is still out on whether consumers will adopt the service en masse. There are considerable challenges to overcome, including adding yet another set top box (and remote control) to the equation. Some analysts argue that video downloads will only work if the service gets integrated into an existing STB/DVR, or the existing STB is replaced with an “all in one” STB which includes video download capability. Service providers including cable and telco are studying how/whether to incorporate video downloading. Some like AT&T (through their AT&T Homezone service) already do so. It would seem that existing providers have the upper hand if they incorporate video downloads into their existing subscription TV model. Solutions like the announced Netflix/LG partnership may be able to build a niche following, but I think they would have a very difficult time supplanting large numbers of cable and telco video subscribers. Time will tell of course and predicting consumer behavior is an inexact science to say the least.