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Tuesday, May 20, 2008
Innovation
Watch Digital Movies on Your TV
Donna Fuscaldo
FOXBusiness
It’s only a matter of time before consumers will be able to access an unlimited number of new-release movies from their television sets, and DVD rental company Netflix (NFLX) wants to be ready.
On Tuesday, Los Gatos, Calif.-based Netflix announced a partnership with Roku, a Saratoga, Calif.-based digital media streaming company to create the Netflix Player by Roku, a device that hooks up to a television, giving Netflix subscribers instant access to a digital library of 10,000 movies and TV shows. The movies don’t include new releases.
The device, which costs $99.99, can be purchased at www.roku.com/netflixplayer and is the next iteration of Netflix’s Internet service, whereby subscribers get free access to movies they can download and watch on a computer. The service won’t cost extra, other than the cost to purchase the device.
“Now streaming video isn’t limited to people sitting in front of the PC,” said Roku chief executive and founder Anthony Wood in a press release. “It’s ready for the TV in the living room.”
The device lets users access an Internet based queue and then play the movies automatically on their TV. The player is roughly the size of a paperback book and requires you to connect the device to a TV and the Internet. The player is also WiFi enabled.
Netflix’s move is designed to position the company for the day when movie studios start allowing their new releases to be distributed digitally. Since movie studios are making a profit on DVD sales, their hesitant to move it to the digital marketplace.
“The DVD market still counts for the biggest percentage of movie profits, so there’s no big incentive for movie studios to transition overnight,’’ said James Friedland, an analyst at Cowen & Co. Netflix’s “launch today is an incremental step in the long-term transition from using physical distribution to digital distribution,” he said.
Today consumers can rent new releases via pay-per-view and video-on-demand options with cable set-top boxes. Still, those cost around $4 per movie and don’t offer an unlimited model, which put Netflix on the map. Netflix also faces competition from Amazon (AMZN) and Apple (AAPL), which have their own Internet-based movie-rental services.
Netflix’s new product, said analysts, give consumers another choice in how they watch their movies, but the impact to its subscriber base is expected to be small. With the proliferation of flat-panel televisions, consumers increasingly want to watch digital movies when they want, without being stuck in front of a PC. But in order for things like Netflix Player by Roku to garner mass appeal, there has to be a large amount of content readily available. Netflix only offers 10,000 movies and TV episodes compared with the 100,000 it offers through its DVD distribution business.
Working in Netflix’s favor, at least with existing customers, is that many of its subscribers aren’t solely looking for the newest releases. Netflix customers are focused on category titles, said Stacey Widlitz, an analyst at Pali Research. “This might actually appeal to a percentage of their base,” Widlitz said.
What made ultimately be the biggest barrier for Netflix Player by Roku, however, is the $99.99.
“Consumers don’t like spending money to get something their already getting on a monthly basis,’’ said Widlitz. “How many consumers want to purchase a box to get movies filtered in?”
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Some mutual funds want you to pay for the privilege of them (or your investment adviser) taking your money to invest. It's called a load, and it works like a cover charge to get into a nightclub. Luckily, there are such things as no-load funds. As the name implies, shares of these funds are sold without a fee paid to a broker or investment advisor.
The entire amount you invest in no-load funds goes to work for your returns. On the other hand, with load funds, right off the bat you're charged commission (not to mention other fees incurred over the life of the investment). Let's say, for example, you invest $25,000 into a load fund that charges a 5% commission. This costs you $1,250 off the top, bringing your actual investment down to only $23,750.
The often-cited horse race analogy argues against investing in load funds. Here's the logic behind it: Would you place a bet on a horse that had to start a race 200 yards behind the others? Well, maybe you would if you got a tip from a sketchy, trench coat-clad man in a dark alley. However, under most circumstances, it's not smart to put your money on that handicapped horse.
But some argue that at times that man in the trench coat (aka your broker) knows more about the horses than you do, and has a better shot at picking a winner. Also, sometimes these fees are unavoidable because some funds are available only through investment advisers.
Cost-benefit analysis can help determine when a load fund is worth it (in other words, when it will score you a load) and when it is better to "do it yourself" and avoid the fees. Load-fund fees range depending on share class and can cover a variety of costs, such as paper work and fund management.
