Netflix and LG to make a run at Apple TV and iTunes

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Netflix, the world's largest online movie rental service, and electronics maker LG said Thursday they have joined forces to develop a set-top box for consumers to stream movies and other programming directly from the Internet to HDTVs — bypassing the need to use a personal computer.

The two firms offered no pricing or other details of the service, other than to say that the collaboration will hinge on technology embedded in a hardware-based LG networked player planned for release sometime during the second half of 2008.

By connecting the LG device to their home entertainment centers, Netflix subscribers will be able watch movies streamed from the Netflix Web site on their large-screen home theater HDTVs.

The announcement comes just days after reports surfaced that Apple is planning to broaden the appeal of its own set-top-box, Apple TV, by debuting a compatible iTunes movie rental service at this month Macworld Expo in San Francisco.

Like the product proposed by Netflix and LG, Apple TV lets users stream audio and video content purchased from the iTunes Store to their big screen TVs. However, the current incarnation of the Apple device still requires that users purchase the content through iTunes software running on their computers before channeling it wirelessly from the computer to the Apple TV.

Recently, the $299 Apple TV device has been singled out by pundits and industry watchers as one of the lone blemishes in Apple's otherwise stark track record of continuous smash hit consumer electronics products. In particular, early adopters of the device have been frustrated by the sheer dearth of HD-quality video content being made available for playback on the device from the iTunes Store.

Apple has thus far garnered the support of only Walt Disney to provide its movie catalog over iTunes, and even in that case does not offer those movies in high-definition. Instead, the films are encoded at "near DVD" quality, which Apple has deemed suitable for viewing on large HDTV sets.

However, consumers who've shelled-out thousands for some of the larger HDTV sets beg to differ, arguing that the quality when scaled on such a large canvas appears blurred and watered down. Still, neither Netflix nor the reports on Apple's upcoming rental service have provided any indication that digital movie copies are bound to be made available in high-definition any time soon.

At issue are several factors, primarily concerns over the bandwidth required to support streams of HD video content on the user end and pricing demands on the part of Hollywood studios who've been reluctant to bend to Apple chief executive Steve Jobs' call for uniform and reasonable pricing.

Currently, Apple sells sells new "near DVD quality" Disney releases for $12.99 when pre-ordered during their first week of availability, and $14.99 thereafter. Library titles fetch $9.99. But those rates have so far proven unappealing to other studios, who want the flexibility to charge more for premium releases and also to maintain healthy relationship with large big-box retailers like Wal-Mart and Target who pay slightly higher wholesale costs for physical copies of the same films. What's more, studios have been charging nearly two and three times as much for high-definition versions of new movies, providing yet another barrier to the proliferation of HD movie content over digital download services.

Still, Netflix stands to emerge as the single largest threat to Apple's fledging movie download service with its more than 7 million members and video catalog of over 90,000 titles.

Already, the Los Gatos, Calif.-based firm sports a growing selection of more than 6,000 movies and TV episodes that have been digitally encoded for delivery over the Internet. However, until LG releases its compatible set-top-box in the latter half of the year, consumers will remain restricted to watching those videos on a computer screen.