• The set-top box is without a hard drive and is built to enable rentals only (no downloads). • The set-top box can connect to a home network wirelessly and bypasses the PC altogether except that users still have to use a PC to manage their Netflix queue. • Only the 10,000 or so titles currently available on Netflix's "Watch Now" PC-based service are available for TV viewing using the set-top box. • Existing Netflix subscribers do not have to pay any additional monthly fees to access these movies on their TV - it's just another extension of the core service.
Once again, Netflix beat Blockbuster to the punch. As TDG warned Blockbuster a long time ago, it needed to get a branded movie rental set-top box into the home living room as soon as possible or risk being trumped by Netflix yet again. As usual, Blockbuster didn't listen, still asleep at the wheel when it comes to true innovation. Yes, buying Movielink was a good move but even when officially relaunched as a Blockbuster-branded service will be but a me-too move, one that will be lost in the shadow of Netflix's new TV strategy. Netflix has more than 8.2 million users who have an established billing relationship with the company; a relationship that can easily be exploited to push these inexpensive set-top boxes into the home living room. In the beginning, the price may be $99, but we expect that to evolve into a myriad of promotional offers targeting both existing and new Netflix subscribers (e.g., discounts to reward loyal customers or extended subscription contracts in exchange for platform subsidies). Again, Blockbuster should have already done this, but even under new leadership the company is too busy chasing non-video strategies to head-off its most formidable competitor. This is a subscription rental model, not a one-off rental or purchase model like that of Apple TV, Vudu, or CinemaNow. In other words, for the same monthly fee I'm already paying Netflix to rent physical DVDs through the mail or watch movies on a PC, I can extend this experience to my TV. No, Hollywood and "incumbent" over-the-top movie models are not at all excited about moving to a subscription-based model (it will cannibalize movie sales and dilute per-movie rental revenue). Yet as TDG continues to warn, these forces can do little to stop the "one fee, all-you-can-eat" on-demand consumption, whether for music or video. The one force capable of turning this tide is the facility-based broadband carriers, those already aggressively lobbying Congress for broad bandwidth management rights. BitTorrent may now be their scapegoat, but imagine what bandwidth consumption will look like if a subscription-based all-you-can-eat movie rental service takes hold. Carriers such as Comcast and AT&T are both looking to push out their own movies-on-demand services, giving them even greater incentive to squash budding over-the-top video delivery schemes by whatever means possible. This speaks to the inherent conflict of interest that facility-based broadband providers have always encountered: maintaining an "open" network enables competitors to "ride for fee" and use their "fat pipes" to deliver services that directly compete with the carrier's services.