Gamasutra reported today on an admission from Netflix; it has polled its user's interest in streaming movies using an Xbox 360.
I'm not going to get into the nit and grit of why this is awesome, I already did that. I do have to wonder, the signals are pointing to an exclusive, but what's in it for Netflix? In my mind this is a no-brainer for Microsoft. They get a near universal catalogue of film and television, an established userbase and a HUGE new revenue stream. But for Netflix, it seems a little fuzzier. Don't get me wrong, having a hardware solution that streams directly into your living room would be a major feather in their cap, but why the X360? I don't know what they really have in mind, but an exclusive arrangement doesn't make sense. I can see why Netflix wouldn't want to get into proprietary hardware manufacturing/shipping, but an exclusive with a gaming rig? Apple TV makes more sense, though it's very possible Mr. Jobs has his own plans and isn't interested in teaming up. And while X360 is giving the PS3 a serious pounding, Sony is an industry stalwart with a good chunk of potential customers.
And if you'll let me play devil's advocate for a moment (and you must), why gaming at all? While the negotiations would be about as chummy as a butcher at a PETA meeting, the cable companies offer far and away the broadest distribution, and just about all of them are clamoring for more VOD content. As a bonus, no need to come up with reasons to convince non-gamers to pick up what, for better or worse, is seen as a gaming console.
Who knows, maybe the company line of delivering movies "in as many ways as possible" will prove true and Netflix will adopt all these options. For the record though, my hand goes up in a very big YES to X360 streaming. Please?
You bring up a lot of good points. But one thing I'll take issue with: the revenue stream for MSFT is not the most significant factor, by a longshot. (Keep in mind, it's Microsoft!) It's the overnight "now we're in the *real* entertainment biz--take that, yahoo." Until they have a serious catalog, they can tweak the UI and bells & whistles & drop the price forever; but the content --exclusive, compelling content-- is what will tip the market.
What about games, you say? Despite it's size, growth rate, and influence, gaming is still not seen by hollywood or bcast/cable as true "entertainment industry." Perception is everything in negotiations of this size; it's horse-betting for executives. To have a shot at the other vast licensing deals out there, MSFT has to buy their way in with a major deal, and do it quickly. They've stalled and struck out themselves for years on forging their way into entertainment (remember Softimage? or WebTV?); now is the time for bold aggressive moves, and their options are limited. I assume they gave Netflix whatever they wanted in exchange for an exclusive; if I was in their seat, I would!
And Sony remains self-delusional about their market position; if there were bids on NF's catalog I doubt they came close to what MSFT had to offer. They don't think in terms of partnerships as a requirement for market-domination; MSFT has some of the smartest people in the biz working on their connected-TV strategy: all the way down from Ray Ozzie's speech at MIX two weeks ago, it remains their focus.
The question about what's in it for Netflix is interesting. I don't think they have a lot of decent alternatives at this stage though, to be honest. I hear what you're saying about cable but I think most of them feel their problem is not lack of a good catalog; it's understanding the new model in a DVR/TIVO world where they can't sell ads the same way anymore. Also, the licensing issues with cable programming are far more complex; and most of the big outlets are playing a 'wait and see' with their own homegrown distribution networks like HULU. At the media summit conference in new york earlier this month, those guys were seen as rock stars (true gods of programming/tech among the cable nets)...and I think the Sony oppty just looks 'old world' to Netflix.
From day 1, Netflix has always seen themselves as the newer cooler Hollywood players in a post-Blockbuster world. So their egos need a player the size of MSFT to continue that self-perception of market domination. And maybe it will win. The major loser in this deal is Apple. If I were the Apple TV strategist, I'd hope to have something pretty astonishing up my sleeve...something so compelling it forces all other content players to get on board with me. Remember Ray Ozzie called MSFT's strategy the 'collection of loosely connected devices"...perhaps Apple's strategy is to make the connections less loose.