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Netflix and Roku - The Kick in the Pants the Media Adapter Market Needed

In late March, there was a rumor going around that Netflix was working with Microsoft to enable the Watch Now streaming video feature through the Xbox 360. Although that still remains a rumor, Netflix did make another public announcement today that continues its push to place broadband video at the TV.

Today, Roku introduced the Netflix Player by Roku, a device that enables Netflix subscribers to instantly stream a growing library of movies and TV episodes from Netflix directly to the TV. And, it's only $100. Not too shabby. Of course, Atheros couldn't resist getting its own press release out, noting that its Wi-Fi technology is included in the Roku player.

The media adapter market has been in sore need of this kind of premium content service. We just haven't been all that impressed with media adapters that only offer features such as streaming music stored from a PC to a stereo or playing photo slideshows at the TV. There's definitely consumer demand for these sort of applications, but not overwhelming enough for most consumers to consider dropping a couple of hundred bucks on another black box for the living room. Now, with the introduction of products like the Roku player, media adapters have (yet another) new lease on life. With 8.2 million subscribers to which to tap, Roku can tap a Netflix subscriber group that is likely full of the type of early adopters who can seed the market with (hopefully) positive reviews about how the player extends the value of their Netflix subscriptions by offering value-added streaming video content direct to their televisions. The linkage between media adapters and premium broadband video services definitely solves one of the key growth barriers to the media adapter market, as we wrote in our recently-released report Digital Lifestyles: 2008 Outlook:

"The problem with media adapters is that they are still home networking nodes with all of their complexity, and many lack a truly premium content experience. In other words, users are stuck watching some niche online video service, where they really want a premium offering that puts higher-quality video at the television set.: