Netflix + XBox

Posted on July 17, 2008

Microsoft’s Xbox will be able to stream thousands of movies over the Internet, thanks to a deal with Netflix that highlights the way gaming devices are expanding into all-purpose home-entertainment hubs.

The deal marks an important expansion for Netflix, whose streaming service has been available on computers instead of TVs, unless consumers had bought a streaming device from Roku. The arrangement will let Netflix subscribers stream 10,000 movies and TV shows to Xbox consoles for viewing on television sets, beginning this fall. Xbox had movies and shows available for download before, but only half as many.

Microsoft already has sold more than 10 million Xbox 360 consoles in the United States. More than half of Xbox 360 owners pay US$50 a year for a “gold” membership, which will be required for access to Netflix’s “Watch Instantly” library. They also must subscribe to Netflix, which charges $9 per month for the least expensive plan that includes unlimited streaming.

In partnering with Microsoft, Netflix may be building the streaming service to prepare for the day when the convenience and widespread availability of video downloading kills its DVD-by-mail service. That day will most surely arrive.

Although Netflix chief executive Reed Hastings still believes DVDs will be around for years to come, he has already poured more than $40 million into developing the streaming service.

Until recently, Netflix’s streaming service hadn’t been a big hit because there was no way to easily watch the movies on anything but a computer.

That began to change two months ago when Roku began selling a small set-top box that could stream to movies to any television set. Roku sold out its initial supply of the $100 player in just two weeks. The device is now back in stock.

Microsoft had been widely expected to embrace Netflix’s streaming service, partly because the two companies seem like natural allies. They share a common rival in Apple, which has battled Microsoft in the personal computer market for decades and last year emerged as threat to Netflix with a downloading service for renting movies and TV shows.