Set Top Box in the TV a flyer? - It will be a hard sell.....

Netflix is to offer online Video on Demand via a variant of the closed Set Top Box play, by putting the STB in the TV (from the WSJ):

On Monday, Netflix Inc. is expected to announce a deal with Korea's LG Electronics Inc. that will make a Netflix online-video service available on a new line of high-definition TV sets from LG due out this spring. The online service offers 12,000 movie and television titles.

The issue with this business model is that its a closed system play, and requires the customer to make a capital investment upfront (and/or Netflix to make a subsidy). As IPTV players are finding out (and as we predicted when we set up this blog over 2 years ago) the "free ride" via laptop to TV is winning out - as the WSJ notes:

Instead of the often expensive packages of video content from cable and satellite providers, the Internet could theoretically deliver a much wider array of entertainment and information choices -- many of them free.

Intel, Apple Inc. and others have promoted specially tailored PCs, set-top boxes and other new devices for bringing video from the Internet to living-room TV sets. Few people bought them, but industry executives believe users will be more receptive as Internet connections become a standard feature of more ordinary gadgets -- such as TV sets, high-definition movie players and videogame consoles.

Two things need to be dissected here - firstly, will IP connectivity become standard in many consumer electronics devices, including TV - yes, absolutely. Secondly, will people prefer proprietary locked in media systems running over IP to open / full service IP capability - answer, No. And furthermore, the User Interfaces in most specialised "Media Centres" to date have not been very good, which is why (apart from overpricing) takeup is pretty low. (Apple being teh notable exception here in media UI to date)

LG predicts its plasma and LCD Internet TV sets will cost roughly $300 more than comparably-sized sets without online capabilities. Unfortunately, that's the price of a decent home router, a VGA to TV converter and a low end PC which gives you internet to TV connectivity plus all the other things a PC can do. Thats a cr*p deal in normal times, in the 2009/2010 Crunch its a harder sell.

Our take - the CPE (Customer Premise Environment) endgame here will be content independent, the desire for a media lock in at STB level is low enough, trying to lock in the TV as well is a far tougher ask. Do i have to buy another TV to get Amazon movies? And another for Blockbuster? Heck, why not just load up Hulu or iPlayer and get a TV converter?

Still, one thing we can guarantee - these will be sold hard to consumers, but we think it will be a hard sell as well.