(2009-06-24) Netflix Future

ReedHastings, who co-founded the company, is quickly trying to shift NetFlix's business - seeking to make more videos available online and cutting deals with electronics makers so consumers can play those movies on television sets... Mr. Hastings's biggest challenge in reorienting Netflix is getting Hollywood to go along for the ride. Netflix's selection of more than 100,000 DVD rental titles is made possible by the "first-sale doctrine" of U.S. copyright law, which permits buyers of DVDs to lend them out without studios' consent... In contrast, to deliver movies and television shows over the Internet, Netflix has to license them from studios. So far, it has gotten only about 12,000 titles... The main reason: Netflix must compete with television subscription services like Time Warner's HBO, ViaCom Inc.'s Show Time and others that gain exclusive rights to show studio movies on cable channels or through on-demand systems. These pay channels have bigger audiences than Netflix and a longer history of hashing out complicated licensing agreements to secure movie rights. Their lucrative deals can prevent Netflix from getting Internet rights for movies until years after they're released on DVD... After Netflix introduced its streaming service, Mr. Hastings assembled a team that came up with a prototype - a small, square metallic box that would access the Web through a consumer's broadband connection, let viewers navigate a list of Netflix movies by remote from their couches, and sell for under $100. But the product's early 2008 public unveiling neared, several senior Netflix executives began to express misgivings about straying into the unfamiliar hardware business... The group's conclusion: Netflix would stay out of the hardware business, handing the project to Roku Inc., a privately owned start-up that Mr. Anthony Wood had founded. Netflix invested $6 million for a minority stake in Roku and sent about 20 Netflix employees to work there under Mr. Wood... Mr. Hastings instead began talking to consumer-electronics companies about including software that would allow consumers to access the Netflix streaming service from their devices. The company reached agreements over the next year to get Netflix into Blu-ray high-definition movie players by LG Electronics Inc. and Samsung Co., Tivo Inc. digital video recorders, Microsoft Xbox 360 and big-screen television sets by Vizio Inc. People involved in the spinoff say it has turned out well for both parties. Roku says it has sold hundreds of thousands of its Netflix set-top boxes.