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Amazon Unbox Could Unbundle Too

unbox1.PngAn interesting piece of news speculates Amazon (AMZN) may be partnering with Tivo (TIVO) to use their DVR platform.

Seattle-based Internet retailer Amazon, which recently launched a digital video downloading service aimed at taking on Apple’s Computer Inc.’s iTunes service, is talking with TiVo about a deal that “could be a key step toward bridging the gap between the home computer and the television set,”

Note the Source: New York Post. Caution required.

Regardless, this is exactly what investors should expect from Tivo, and the prospect of forward progress is encouraging. The Tivo/Netflix (NFLX) announcement was supposed to be exactly this, but never happened.

Apple (AAPL) drew an incredible amount of attention with its iTV announcement (see ‘Apple Overload and Zune Confusion‘), which in reality was a rather pathetic low quality media extender that relied on external storage and a powered-up PC. The library is currently limited to Disney only titles. Studios are concerned that the Apple monopsony in digital music might be extended to video as well. It’s obvious that Hollywood wants to enable multiple supply chains to the consumer.

Amazon’s key differentiator?

Amazon has deals to sell movies online with every studio except Disney, whose board includes Apple Chief Executive Steve Jobs.

Amazon launched the Amazon Unbox service to near universal disdain. Unbox allows users to download movies for viewing on PC’s but does not allow them to be burned to a DVD for viewing in the living room. The Unbox service is plagued by technical glitches surrounding the custom player software on the PC.

I am predicting here, but conceptually this agreement should allow broadband connected Tivo’s to download and display movies purchased from the Amazon Unbox site. A standardized and tightly controlled hardware platform like a Tivo would a more consistent experience. Given the latest Series 3 Tivo can do full HD quality (with the DRM friendly HDMI the studios will demand for HDCP support), it is an ideal (perhaps even the best) platform for downloading high quality content and enabling HD distribution.

This is the same goal I expect Microsoft (MSFT) and Sony (SNE) to pursue with their gaming platforms, Xbox and PS3. It is only a matter of time. There are 1.5M Tivos and several million Xbox360’s in homes today that could be connected over broadband and enabled to download content.

The losers? Cablecos and any Telcos that need video to survive. Congress has been nudging the cablecos to provide a la carte programming, allowing users to purchase only the channels they want. Ultimately this is unnecessary, as people wil buy Tivo’s or other set-top-boxes and go a-la-carte by downloading the video they want to see over their cable/DSL/FTTH broadband connection.

Better quality than TV. With or without commercials. DVD’s unboxed, and TV unbundled. Sign me up.

Once Comcast (CMCSA), Cablevision (CVC) and other cablecos start losing video subscribers to services like this, expect a full-scale Net Neutrality freak out.

This may end up being an unsubstantiated rumor. But the concept and outcome are inevitable. Which may be why rumors of Comcast using their own set top box to unbundle may not be so far fetched.

Discussion

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  1. I’m going to go out on a limb and say that this is never going to happen. It’s not that I doubt that TiVo could be negotiating with Amazon, but as soon as the studios find out about it they will squash it. When it comes to TiVo, it’s personal and they won’t be able to move past that no matter how great it would be for consumers. I think this is a large part of why Netflix is trying to distance themselves from TiVo now. I really hope I’m wrong about this one and it was pleasant to see TiVo partner with CBS this year, but I think that TiVo would be partnering with the studios directly if they could get any traction there.

    Posted by Davis Freeberg | September 22, 2006, 5:13 PM