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September 15, 2004

TiVo/ Netflix Partnership Presents Security and Licensing Issues

TiVo and Netflix have allegedly been planning to form a partnership that has been long awaited and suggested by many. The partnership seems logical as Michael Ramsey, TiVo chaiman, is a Netflix board member. The purpose of this partnership would be so that subscribers of both services could download Netflix movies over the internet directly to their TiVo boxes. This would eliminate all the time and hassle involved of waiting for DVDs to arrive in the mail. Just imagine...now you won’t even have to walk to your mailbox to watch a movie (and the term couch potato will take on its most literal meaning yet).

This partnership would be able to accomplish high (or at least decent) quality versions of its movies right on the TV, much to Hollywood’s dismay. Obviously, Hollywood will not cooperate until there is a secure content security system. It seems that TiVo is one step ahead here. According to TiVo’s spokesperson, Kathryn Kelly, TiVo has already developed a security technology called TiVoGuard, and this technology has already been approved by the FCC.

Licensing, however, may not be so simple. Hollywood is notorious for taking years to negotiate simple licensing agreements. One recent example of this is that Starz Encore Group has been negotiating with Hollywood for four years now in order to extend its film rights to the internet. One driving factor for delays by studios in Hollywood may be that they would receive less of the revenue associated with internet licenses than they would for mail rentals or even good ol’ fashioned walk-in rentals. This fact is evinced by the revenue percentage to Hollywood from pay-per-view and similar contracts, compared to actual movie rental markets.

It seems that technology is not the hold-up in the TiVo/ Netflix partnership. The details regarding licensing agreements and anti-piracy security systems will be a hurdle that will take a lot of time to overcome.

The moral of this story: Keep your Blockbuster card for a little while longer.

Kelsey L. Buntyn

Posted by at 01:09 PM.
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