Jul 25, 2008

Entertainment - It isn't time to drop cable yet

NEW YORK (Reuters) - Couch potatoes love television, but some simply have no interest in watching sports or kids shows. So why should they pay for it?
More U.S. TV watchers are asking the same question as cable and satellite TV bills creep higher. The government wants to know why consumers can't just pay for the channels they want and many technology and media companies are dreaming up new alternatives for delivering only the TV programs viewers want.
A fresh batch of options from Sony Corp and Amazon.com Inc, Netflix Inc and Roku, as well as Microsoft Corp's video game console Xbox 360 launched over the past few weeks promise to do away with cable all together.
The latest push into the living room aims to solve what has stymied earlier products, including the complexity of hooking up these devices, lack of content and relatively high prices, with some devices costing well past $500.
About 8 million Netflix customers, accustomed to renting DVDs by mail, can now purchase a $99 set top box from Roku and watch some 12,000 films and shows on television for no additional fees.
Sony Bravia TV owners who buy a $300 device that connects to the back of TVs and to the Internet can already watch YouTube videos. Soon, Bravia customers will be able to order from Amazon movies and shows streamed directly to TVs.
But even the experts don't think cable will be replaced anytime soon and point to a string of high profile failures, including Walt Disney Co-backed MovieBeam and privately held Akimbo.
"The content deals are starting to come together, but the library is still pretty narrow," said Mark Kirstein of Scottsdale, Arizona-based market research firm MultiMedia Intelligence.
A general aversion to yet another gadget in the living room and the high prices are other reasons why the idea has failed to catch on. Premium channels such as Time Warner Inc's popular HBO are also unavailable on the Internet to non-subscribers, except through iTunes, where some programs are sold.
But that has not stopped the tech industry from buzzing again after a number of new products that address some of these issues were unveiled in quick succession.
A new set-top box born out of a partnership between DVD rental business Netflix Inc and device maker Roku, in which Netflix owns a minority stake, is emerging as a leading candidate for consumer appeal, Forrester Research analyst James McQuivey said.
"Despite its relatively meager content, the Netflix Player by Roku is a solid winner, overcoming the barriers that hamper the rest," McQuivey said.
Unlike others that came before it, Roku is counting on offering services beyond Netflix, said Tim Twerdahl, vice president of consumer products at Roku.
"Our vision is to open up the box," he said.
Prepare to find free, advertising-supported video services, pay-per-view services and YouTube-like user generated videos.
Netflix is also planning to let current subscribers find its movies online in as many ways as possible. It struck a deal with Microsoft to allow subscribers to the video game console Xbox 360's online service to also watch streamed Netflix movies.
Earlier, Netflix said it would offer its Internet service on an LG Electronics Inc-manufactured set-top box.
"It's too early to tell who is going to prevail," Netflix spokesman Steve Swasey said.
Tech industry watchers say the current crop represent the first wave of products that have shown any real promise. Importantly, many are backed by financiers with deep pockets.
But will it matter? Apple Inc's AppleTV has yet to light up the industry the way its iPod and iTunes service transformed the music business, critics point out.
Then there's Hollywood, which has been reluctant to offer more new releases on the Internet for fear of jeopardizing DVD sales that account for more than half its profits.
"They're going to fight amongst each other for a teeny-tiny part of the market," McQuivey said. "If you have cable service and a DVD player, you already have a much better solution than any of these boxes can provide you."
Sony is tackling the problem in yet another way by appealing to its own movie studio to release its films ahead of the DVD release. It plans to offer Sony Pictures's "Hancock" later this year for Bravia TV owners.
For now, "this is a Sony initiative. It's something that can be realized with other studios," said Sony Electronics's senior manager of business development Robert Jacobs.

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