Netflix CEO scoffs: We won’t lose any sleep if Apple debuts iTunes movie rentals

“DVD-by-mail service Netflix Inc. will begin delivering movies and other programming directly to televisions later this year through a set-top box that will pipe entertainment over a high-speed Internet connection,” May Wong reports for The Associated Press.

“The set-top box, to be made by LG Electronics Inc. as part of a partnership announced late Wednesday, is designed to broaden the appeal of a year-old streaming service that Netflix provides to its 7 million subscribers at no additional charge,” Wong reports. “LG Electronics didn’t reveal how much the set-top box will cost when it hits the market in the summer or early autumn. Similar devices made by Apple Inc. and Vudu Inc. cost $299 to $399.”

MacDailyNews Take: Lucky Goldstar? Sorry, LG? Sounds a bit cheesy. Summer or early autumn? Sounds a bit late, too. In other words, this is a classic attempt at freezing the market with vaporware. Netflix wants to hold onto their customers, who might be movin’ on up to a deluxe apartment in the sky beginning on January 15th, if rumors about Apple debuting iTunes rentals that work with iPod, iPhone, Macs, PCs, and Apple TV bear, er… fruit. And, who’s doing the software and user interface? Netflix? LG? Or some other outfit that doesn’t know what the hell it’s doing?

Wong continues, “The set-top box is supposed to serve as a bridge that will enable just about anyone with a high-speed Internet connection to plug in a few wires so they will be able to access Netflix’s Watch Instantly feature on their TVs.

“Subscribers will still need to use a computer to pick out which programs they’re interested in streaming. The selections, culled from more than 6,000 titles available in streaming library, will then show up on the TV screen,” Wong reports. “‘It’s going to be very slick and easy,’ said Reed Hastings, Netflix’s chief executive officer.”

MacDailyNews Take: Again, classic defense is being played here by a very nervous outfit. Promise the world, “very slick and easy,” but wait until “summer or early autumn,” and, for God’s sake, don’t try Apple’s solution! It’s also meant to reassure Netflix shareholders who, if they aren’t already, might be thinking of bolting come January 15th. This is what companies do when they have nothing and they believe the rumors floating around. What this tells us, besides the fact that Netflix is very nervous, is that the rumors of iTunes rentals are quite likely to become reality soon. If Apple TV gains the ability to access iTunes content directly without the need for a computer, Netflix will be toast that much faster. If Apple TV gets it, you can assume that iPhone, iPod touch, and whatever new device(s) Jobs has up his sleeve will get it, too. If you’re thinking that things don’t look so great for Netfix, you’d be right.

Wong continues, “The LG Electronics alliance is just the first of several partnerships Netflix hopes to strike this year to extend its delivery options beyond the mail. Although he wouldn’t provide specifics, Hastings listed video game consoles and high-definition DVD players as other potential channels for Netflix. ‘We want to see 100 Netflix-capable devices on the market,’ Hastings said.”

MacDailyNews Take: Wanting and getting are two completely different things, Mr. Hastings. Does Netflix really think that they’re going to freeze a market that’s chock full of Macs, PCs, iPods, the burgeoning iPhone and soon-to-be-burgeoning Apple TVs that’s just waiting for compatible, portable rental content done right? Probably not, but, as we already know, Netflix has nothing until they roll out some likely half-baked thing come “summer or early autumn.” They have to do something, anything, however weak it may be.

Wong continues, “Netflix has spent about $40 million on the development of its streaming service during the past year. The financial commitment hasn’t been enough to convince many investors that Netflix will be able to survive a widely anticipated shift that that will turn DVDs into an afterthought as digital downloading proliferates. The persisting worries are one of the biggest reasons that Netflix’s stock price remains roughly 30 percent below its highs of nearly four years ago.”

MacDailyNews Take: Standing like a deer in the headlights of Apple’s rumored oncoming steamroller spouting vaporous promises is hardly likely to inspire investor confidence, Mr. Hastings.

Wong continues, “One of Netflix’s most formidable threats yet may be looming just around the corner, with Apple reportedly preparing to launch an online movie rental service that is supposed to include titles from News Corp.’s Twentieth Century Fox and Walt Disney Co.”

MacDailyNews Take: Wong finally gets around to mentioning the impetus of Netflix’s need to spew vapor.

Wong continues, “An online movie rental service could give more people a reason to buy Apple’s device for delivering programming to TVs. The gadget, called Apple TV, so far hasn’t taken off like the company’s wildly popular iPod and iPhone. Piper Jaffray analyst Gene Munster estimates about 1.8 million Apple TV devices had been sold through 2007, but he expects another 2.9 million units to ship this year. ‘If (Apple) does what has been reported, they will reach a very big market,’ Hastings said. “But the addition of Apple to the rental market isn’t causing us to lose any sleep.'”

Full article here.

MacDailyNews Take: That last statement has a high probability of coming back to haunt you, Mr. Hastings. We iCal’ed it so fast, it’d make your head spin. Quick, somebody ask Mikey Dell what he’d do if he was running Netflix! He’d likely be right this time. Bottom line: in our experience, executives who make these type of statements are almost certainly very tired. From losing sleep.

MacDailyNews Note: That figure of “1.8 million Apple TV devices sold through 2007” attributed to Munster by Wong, may be a mistake or misprint. We’re fairly sure that Munster’s number is 800,000 Apple TVs in 2007. We do believe, however, that the article correctly reports Munster’s 2008 Apple TV sales prediction at 2.9 million units.

74 Comments

  1. Why partner with LG when there are other devices out there to do the same thing? (e.g. D-Link MediaLounge DSM-520, and NETGEAR Digital Entertainer HD EVA8000)

    Apple TV is already doing better than these anyway.

  2. This is what MDN is really great at doing: taking a mainstream media article, dissecting it concisely, and reporting what is really going on.

    Before the Internet and blogs like this, all we would’ve had to go by would have been stuff like this AP article and others just like it.

    Excellent job, MDN!

  3. Many of these set top boxes don’t work because they do not have a compelling companion service.

    Netflix could definitely offer that. However I doubt that many punters will pony up a couple hundred of dollars to purchase such a unit. Alternatively, if Netflix offered the unit as rental it could work well. I would consider paying an additional $5 for such a download service. Another alternative is offering the PC service with a Mac-friendly program.

  4. “NetFlix was cool while it lasted.”

    Hahahahaha. Yeah. Steam trains, surreys with fringe on top, and brownie cameras were pretty cool once upon a time too.

    Technology marches on. You keep up or you get your old signs displayed in antique shops.

  5. The AppleTV isn’t exactly a steam roller, it’s only sold around 400k units and doesn’t seem to be very popular.

    If Sony or even Microsoft who have a combined install base of almost 30 million PS3s and Xbox360s offered video rental now that would be a bit more threatening.

  6. I like the idea of renting movies from iTunes, but if I have to buy an Apple TV to do it, forget it. I’m not about to spend $299 just to *rent* movies.

    Never had a reason to own an Apple TV and unless they can make it more compelling or make it a lot cheaper, forget it….I’ll pass.

  7. “Netflix CEO scoffs: We won’t lose any sleep if Apple debuts iTunes movie rentals”

    … Add the above quote to the pile containing Ballmer’s prediction of the unimportance of the iPhone, Palm CEO Ed Colligan, saying, “We’ve learned and struggled for a few years here figuring out how to make a decent phone. PC (Apple) guys are not going to just figure this out. They’re not going to just walk in.” – commenting on then-rumored Apple iPhone, Michael Dell saying he’d sell Apple and give the money back to the shareholders, and of course, Laura Goldman issuing a “sell” advisory when AAPL was at $111.98.

    Beautiful.

  8. Netflix User,

    Read the related articles. iTunes rentals will likely be portable and accessible directly from PCs, Macs, iPod touch, iPhone, and Apple TV (and whatever else Jobs and Co. come up with).

    After Jan. 15th, just watch what happens to Apple TV sales.

    MDN MW: Netflix is in “trouble”

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