Written by Ben Koo | 01 November 2008

With this down economy, user adoption of Blu Ray and on demand living room technologies are going to slow and stagnate dramatically from earlier projections. Its not as big of an issue for Blu Ray as it has fended off HD DVD to become to successor to DVD. Its not as much a question of if it will become the next standard, but when it will hit that critical mass that DVD hit in the early 2000's. Maybe its going to slide by a year or so, but the Blu Ray consortium isn't losing any sleep. However I can see this down economy changing the competitive landscape in the emerging digital living room space.

Cable and Satellite providers have not really wowed anyone in advancements of on demand. Apple TV has been the black sheep of the Apple product family. I myself love Vudu (now up to 11,000 movies), but uptake is believed to be less than 25,000 units although Best Buy has thrown their weight behind the product of late.  There are a couple of other second tier competitors through gaming platforms, but the company most aggressively looking to make inroads in this industry is Netflix. Initially I questioned if Netflix could compete in the space as they are not a hardware maker. However Netflix's strategy of building various partnerships with hardware makers gives them added product diversity and depth that that Apple, Vudu, and others cannot match. With Vudu being in precarious position of being an unprofitable startup likely in need of further funding, and Steve Jobs suggesting that the digital living rooms is still just a hobby for Apple, Netflix seems to eying a  preemptive blow to all competitors.

Netflix initially rolled out the box below made by Roku. The Roku box was cheap and rudimentary and still required you to use your computer to make movies accessible on the box.

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Netflix then unvieled the fruits of their LG partnership. Although the box below is somewhat expensive and does not have Netflix's full library of movies, its key differentiator is it doubles as a Blu Ray AND DVD player. A solid and safe investment for anyone wary of committing to just one technology.

To have 2 product out by the holiday shopping season in my mind was pretty noteworthy, but Netflix this week made some more noise by announcing streaming options on both Tivo and XBox 360.

The Tivo 3 series will now stream Netflix shown below and will be the same interface as the Roku box as well as the Xbox.

 

Below is a demo of the Netflix on the Xbox. Pretty slick. Fast forward to about 1 minute 50 in

All that being said, Netflix now will have the help of two established hardware providers doing their heavily lifting for distribution. The LG box is still an attractive stand alone luxury item and the Roku option exists for anyone who wants a cheaper streaming option and not a blu ray player, gaming console, or Tivo. All in all a 4 prong strategy is going to be significantly more effective then anything else.

With tighter budgets for consumer electronics I can see Netflix pulling away as they will not have to rely on hardware sales of stand alone players like Vudu and Apple. With their large subscriber base and the popularity of Tivo and Xbox 360, I do not think its a stretch that 3-5 million people will be utilizing Netflix via an On Demand Hardware device.