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Netflix, Roku bridge the Internet-TV gap

Roku_playerTwo things struck me about Roku's newly announced $100 Netflix Player, a book-sized set-top box that lets people watch streamed video files from Netflix on their TVs. First, it was priced lower than anything I'd previously seen in the "digital media adapter" category (i.e., devices that bridge the gap between the Internet and the TV). And second, it delivered less than any of those other devices. All it can do, in fact, is connect to Netflix's website, select a movie or TV show to stream, then display the chosen program on a TV set.

And that's all it should do, at least for now, argued  Anthony Wood, Roku's founder and CEO (and the guy who started ReplayTV, which introduced the DVR alongside TiVo). Some consumer-electronics gurus would disagree, noting that people are reluctant to stack more black boxes into living-room shelves already crowded with disc players, recorders, amplifiers, game consoles and cable or satellite boxes. But Wood has developed and marketed a series of digital media adapters over the past 5+ years, so he speaks with some authority on this issue.

One challenge for Roku, Wood said, was getting people to understand its products. Like ReplayTV's DVRs, Roku's media players occupy a new product category, so the value isn't obvious to many consumers. Netflix, on the other hand, already has 8.2 million customers and is well known in the mass market. "A box that plays Netflix movies, everyone understands right away what that does," Wood said.

Other devices that take video from the Internet to the TV, such as TiVo and the Apple TV, have multiple functions, including the ability to stream music and video from home computers. But Roku's experience with devices that stream photos and music from the PC to the living room shows that people just aren't that interested in connecting their TVs to their computers through a home network. "The PC stuff is just too hard for people," Wood said. He pointed to the company's SoundBridge products, which can play song files from a PC or broadcasts from the Net. "What people use it for is Internet radio, they don't use it to stream music from their PCs."

Trojan_horse That's why Wood thinks the real action is in providing direct access to content from the Net. And today's version of the Netflix Player is just a starting point. "Over time, we'll add more features to it," he said, with the ultimate goal being to deliver "any video from the Web that someone wants to play on their TV." It may take years to get there, though, in part because of the multiple formats and transmission protocols for video online. Netflix, for example, relies on the Microsoft-developed VC-1 format (and Microsoft's DRM), while YouTube streams in Flash. Roku is moving incrementally, starting with support for top services while also incorporating standard approaches that other content providers could take advantage of down the road. "If people want to build standards-based Internet streaming sites, they'll play on our box," Wood said.

In the meantime, Roku's Netflix player does that and that alone. Netflix hasn't disclosed how many of its subscribers use the streaming service -- a free feature that's been hobbled by a shortage of content (only 10,000 of the roughly 100,000 Netflix titles can be streamed). But Wood said there are "millions" of people streaming Netflix movies and TV shows today, and interviews with focus groups suggest that many more Netflix subscribers would stream programs if they could watch them on TV. So, how much demand could there be for the Netflix Player? "To be honest, we have no idea," Wood said, but added, "Based on sales so far, it's going to be pretty popular."

The photo of the Netflix Player is courtesy of Roku. Thanks to Karen's Whimsy for the public-domain image of the Trojan horse.

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Times editorial writer Jon Healey pens opinion pieces about a variety of business issues, and blogs about technologies that are changing the entertainment industry's business model.

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