The Netflix Set-Top Box Will be a Hard Sell

netflix-logo.pngToday, Netflix took another step away from its reliance on the U.S. Postal Service by announcing a partnership with LG Electronics.  Netflix wants to stream videos over the Internet right to your TV.  Already, Netflix customers can stream movies directly to their PC.   This partnership extends the service to their TVs. LG will bake Netflix’s video streaming service right into a future LG set-top box.  It is a move in the right direction, but think of this more as a technology proof-of-concept than a market-shaking new product entry.

LG Electronics is not saying much about its networked set-top box other than it will be available in the second half of 2008 and will include access to Netflix videos. The problem is that nobody is going to go out and buy a set-top box that can only let you watch movies from Netflix. Anyone who buys this set-top box will most likely buy it for another reason.  The ability to stream Netflix movies to their TV will be just a nice added bonus.

An LG electronics spokesperson told me that there would be other features as well, but would not specify what they might be. Some possibilities: a combo set-top box and Blu-Ray/HD-DVD player, a networked set-top box that streams video from other Websites besides Netflix, a Windows Media Center Extender with WiFi that lets you stream all your music, photos, and personal videos from your PC to your TV, or all of the above.

But no matter what bells and whistles it comes with, any after-market set-top box is a hard sell. Who needs yet another set-top box under their TV? People only have room for a few boxes in their living rooms, not to mention the hassles of wiring it up to a broadband modem that may be in another room. Until Netflix gets this feature integrated into the set-top boxes distributed (and subsidized) by the cable and satellite TV companies, it won’t make much difference to Netflix’s overall business. Netflix has indicated that this is just the first such set-top box deal and that it will try to strike more with other set-top box manufacturers. (Maybe it should talk to Google about including Netflix in Google’s secret set-top box project). Before it gets to critical mass, though, Netflix might have to pay for carriage on some of these devices, and it will take years for it to gain meaningful distribution in American homes.