TiVo and Awaziland RPCV Reed Hastings' Netflix may join forces to provide downloadable movies over Net
TiVo, Netflix may join forces
Downloadable movies over Net
Benny Evangelista, Chronicle Staff Writer
Wednesday, September 8, 2004
San Francisco Chronicle
Chronicle Sections
Shares of TiVo Inc. and Netflix Inc. rose Tuesday after a published report said the two Bay Area firms were set to join forces to rent downloadable movies over the Internet.
TiVo shares soared almost 15 percent to close at $5.08 per share after a report in Newsweek magazine said the Alviso firm had nearly completed an agreement with Netflix to rent movies that can be downloaded into TiVo's digital video recorders. The story, quoting an unnamed source, said the agreement could be announced this week.
Shares in Los Gatos' Netflix, which rents DVD movies by mail, rose more than 7 percent to close at $15.41. When asked for comment, however, Netflix spokeswoman Lynn Britton said there is no deal to announce.
"We talk to TiVo, and we brainstorm with them all the time,'' Britton said, adding that makes sense because TiVo Chief Executive Officer Michael Ramsay also serves on Netflix's board of directors. "But there is not a relationship at this point and no time line for one.''
TiVo's board of directors has a regularly scheduled meeting Thursday, but TiVo spokeswoman Rachel Petersen would not comment on whether a Netflix partnership is on the table. "There is no announcement planned at this time, and we do not comment on speculation or rumors," she said.
TiVo has become synonymous with digital video recording, a tapeless video technology it helped pioneer in the late 1990s. In the same time, Netflix has made its mark renting DVD movies by mail, with subscribers placing their orders on the Netflix Web site.
Both have similar subscriber bases: TiVo has more than 1.9 million customers, while Netflix has more than 2 million. Moreover, Netflix CEO Reed Hastings said in a Chronicle interview earlier this year that his company planned to begin digital movie downloads sometime next year, although he also said he believed only 1 in 1,000 subscribers would use the service.
"We don't believe that there will be much interest initially," Hastings said. "It's probably a little early to enter the market."
Analysts said such a TiVo-Netflix partnership might have long- term benefits for both companies, although the market is already getting crowded with a host of technology and entertainment industry firms making moves to bring video-on-demand services to consumers either over the Internet or through cable and satellite services.
In June, for example, RealNetworks Inc. teamed with cable television movie service Starz Encore Group LLC to rent movies that can be downloaded over the Internet into a computer, competing against two existing online movie services, Movielink LLC and CinemaNow Inc. The Walt Disney Co. has tested its own movies-on-demand system called MovieBeam in three markets, although the company last week scaled back expansion plans.
Analysts said TiVo and Netflix face numerous challenges before they can reap any significant revenues in a market that is just getting off the ground.
For example, a downloadable movie service requires a high-speed Internet connection, yet "most people don't connect their TiVo to broadband,'' said analyst Alan Bezoza of Friedman, Billings, Ramsey & Co. Most of TiVo's subscribers come from satellite TV service DirecTV, while many of the remaining TiVos connect to the service by phone, Bezoza said.
"It's clear that TiVo needs to do something,'' said Bezoza. "If this is the right solution, only time will tell.''
E-mail Benny Evangelista at bevangelista@sfchronicle.com.
