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Netflix Streams Headed to Nintendo's Wii

By : Erik Gruenwedel | Posted: 13 Jan 2010

Following months of speculation, Netflix Jan. 13 said it will offer its Watch Instantly movie streams to subscribers through Nintendo's Wii video game console, beginning in the spring.

Netflix subscribers for the first time will have access to downloadable new and classic games in the Wii Shop Channel, online multiplayer gaming with titles such as Mario Kart Wii, video highlights and information about titles for the Wii and Nintendo DS systems via the Nintendo Channel.

The Los Gatos, Calif.-based online DVD rental pioneer, which has similar streaming deals with Microsoft's Xbox 360 and Sony's PlayStation 3 systems, does not rent video games.

The Wii reportedly remains the fastest-selling home console in history, and reaches more consumers than any other device that supports streaming movies from Netflix.

In December, Nintendo said it sold more than 3 million Wii units in the United States, representing 40% year-over-year growth, and ended 2009 with more than 26 million units sold domestically.

To stream content from Netflix, Wii owners will need a Netflix instant-streaming disc for the Wii console, which will be available for free to Netflix subscribers. The disc looks and operates the same as a disc-based Wii game. Netflix members and Wii console owners can reserve an instant-streaming disc by going to www.netflix.com/Wii.

Once available, the discs will be delivered for free by first-class mail.

Using the Wii remote control, Netflix members can choose a movie or TV episode to watch from their instant queues or pick one directly from any of the lists displayed on the TV screen. They will have the ability to read synopses and rate movies, and will have the option of fast-forwarding and rewinding their selection.

“Our research shows that 86% of all U.S. Wii consoles are located in the living room,” said Reggie Fils-Aime, president of Nintendo America.

For Netflix, which is pushing to incorporate its streaming service in 100 connected devices, the Wii marks a major goal.

“Joining forces with Nintendo … is a very meaningful step in that direction,” said Netflix founder and CEO Reed Hastings.

Analysts and Netflix executives say the disc-based rollout of streaming service for the PS3 and Nintendo would presumably increase subscriber acquisition costs (SAC) in the first quarter.

“We expect Netflix to incur the costs of disc distribution and to pay Nintendo a cut of each subscriber that uses the service on the Wii,” Ralph Schackart, digital media analyst with William Blair & Co. in Chicago, said in a note. “While we believe Netflix will eventually become integrated on the PS3 (similar to Xbox 360) and not require a disc, we do not know if Wii has the technological capabilities to fully integrate Netflix.”

Indeed, Wii is not able to stream in high-definition, unlike the PS3 and Xbox.

Eric Wold, analyst with Merriman Curhan Ford & Co. in New York, said that should Wii owners take to Netflix, he would expect a surge in churn, or the percentage of subscribers who do not renew.

“When Netflix reports fourth-quarter results in late January, we would not be surprised if management took the opportunity to set the bar low and provide initial Q1 and 2010 guidance that was below consensus estimates, due to the addition of the PS3 and now the planned addition of Wii,” Wold wrote in a note.




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