Netflix's Roku is Doomed to Fail

May.21.08 | About: Netflix, Inc. (NFLX)

Netflix (NASDAQ:NFLX) and Roku Tuesday announced the $100 Netflix Roku. What's a Netflix Roku? It's a $100 box that will let you watch Netflix "Watch Now" movies on demand with yet another new box to clutter up your living room. CNET has a review here. They say they've had a box and have been testing it for two weeks. Interestingly, it looks like Mike K, who runs the top Netflix blog on the internet Hacking Netflix, hasn't had one for the past two weeks. Interesting how everyone is always saying that "Netflix gets blogging."

So why is this a bad move? Easy. Because nobody will buy the box. Well not nobody. They'll sell a couple of them I suppose, but this thing will never really get off the ground in a big way. We've seen this movie before, it was called Akimbo. Remember the Akimbo box that was going to revolutionize how we watched TV? So why will the Netflix Roku box fail? Simple.

1. People don't want more boxes in their living room, they want less. A satellite receiver or cable box, an XBox 360, a home theater sound system, a TiVo, an AppleTV, a DVD player, etc. etc. The last thing people want is one more ugly box cluttering up their living room.

2. The content on the box is not very compelling. Do I want Netflix "Watch Now" in my living room? Sure. Would I pay $100 to buy a box that streams old episodes of Columbo or Xena Warrior Princess Season 1? No.

Can I get Juno on the Roku? No. Can I get Michael Clayton, or There Will Be Blood or American Gangster on the Roku? Nope.

Now some people will say that the hot new releases will be on this box, that it's only a matter of time, etc. but I think until we see that, the box is premature.

The funny thing is that there is already a better way to get Netflix "Watch Now" into your living room without having to pay $100 to buy yet another box. It's called the XBox 360. You can already (theoretically) stream Netflix's "Watch Now" service directly to your XBox 360 with your Media Center PC (that is up in your attic or over in your home office and connected via your home network -- not in your living room). I've been trying to get this to work a few weeks myself now but I've been hampered by the dreaded Netflix/Microsoft (NASDAQ:MSFT) "good for the consumer" DRM issues.

So why is Netflix screwing around with Roku, when they could be working on and developing a better solution with the XBox 360? My guess is that it's simply shortsightedness. Roku is probably offering them something like $20 per box and Microsoft likely won't pay them anything. The problem is that $20 per box doesn't amount to a hill of beans if you don't sell any boxes.

The better solution is to better improve the XBox 360 version of "Watch Now" and then let Microsoft's marketing department push this new "one more reason why people ought to buy an XBox 360" (that also is a DVD player, game player, extender which gets all of your TV, photos and music to your living room, and now also plays Netflix content -- think less boxes, not more).

Of course if Netflix pushes this idea then nobody will buy the $100 (and their $20 cut) Roku box.

Of course another way to spin this story is simply that the Roku is the best thing since sliced bread and is the "$100 AppleTV Killer" like they did over at CNET's News "Blog", which got to break yet another story. Good thing Netflix gets blogging!