Netflix unveils device that lets users stream movies

May 20, 2008, 3:37 PM UTC

By Michal Lev-Ram

DVD-by-mail service Netflix announced Tuesday that it will start selling a device that lets its customers stream movies directly to their TV. That doesn’t mean Netflix customers should say goodbye to those bright red envelopes just yet – at launch, the new player will be able to download just 10% of the company’s extensive library, which includes over 100,000 movies and television shows. But, as more titles becomes available, the device could help usher in the end of the era of sending DVDs through snail mail.

After all, many Netflix customers are so-called early adopters – the type of consumers who like to buy early versions of new technologies or services sooner than their peers. So it’s not unlikely that at least a small portion of the company’s 8.2 million subscribers will be open to trying a new way of receiving movies. Especially if that new way works better than the old one.

Roughly the size of a paperback book, the Netflix player is made by a Silicon Valley startup called Roku, whose founder developed the first Digital Video Recorder (DVR). Customers will need to pay a one-time fee of $99 to purchase the device. After that, any Netflix subscribers who are signed up for plans that cost at least $9 a month will have access to an unlimited number of movies and shows, which will be delivered to the box (and their TV set) over the Internet.

The Roku device is the first of what will probably be several set-top boxes available through Netflix. Last January the company announced it was partnering with LG Electronics to develop a device that will let users stream content directly to their HDTV set.

Of course, there’s already the $229 Apple TV, and an Amazon service that lets consumers stream movies using their TiVo video recorder. But Netflix is hoping that both new and current users will be attracted to its new set-top box for its relatively low cost and “simplicity” – the device lets people browse and choose films online instead of having to dig through 10,000 titles on their TVs.

But even if the Roku box is a hit, it could still be a challenge to Netflix’s bottom line, at least initially. Early adopters also tend to be avid users. And, unlike Netflix’s DVD-by-mail service, the new digital download offer will allow customers to stream an unlimited number of movies for a flat monthly rate. That means people could be watching more content for the same price. On the other hand, in the long run the Roku box could help attract and retain customers, which is a lot more than those bright red envelopes can do these days.