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If you’re a subscriber to the DVD rental-by-mail service Netflix, you probably want to get your hands on the new Roku box. This device lets you stream any of Netflix’s 10,000+ “Watch Now” movies (movies that can be watched immediately over the internet for free with your subscription) to your TV set instantly. Quantities of the device are already scarce.

A new tidbit may make the device even more attractive: With a simple software download, other services beyond Netflix will soon be able to use it, according to Forbes.

This changes the device from a nice little purchase (it’s only $99), into a potential Trojan horse for digital content in your living room. Of course, it entirely depends on what other services reach agreements to use the device. Roku would only say that other “big name” providers could bring their services to the device with a simple update.

If it’s a movie download service such as Amazon’s Unbox (which currently has a deal with TiVo to get into the living room), that could be big. It would bring recent releases along with the vast array of Netflix’s catalog films to one device.

Of course while Roku isn’t exclusively Netflix, Netflix isn’t exclusively Roku either. The company plans to release another box featuring its “Watch Now” service in conjunction with LG later this year. There’s also an intriguing rumor that the service could come to Microsoft’s Xbox 360 gaming console.

[photo: flickr/ccarlstead]

Once a year venture capitalist Heidi Roizen and her husband Dave Mohler open up their Woodside villa to host the SD Forum’s Visionary Awards honoring pioneers of Silicon Valley. Each time I attend, I’m mesmerized by the estate and its furnishings, from the Moroccan guest house with its old rifle collection to the Tuscan villa architecture with its zany mix of animal head trophies.

Upon walking up the long driveway into the foyer of the mansion, I was greeted by Ann Winblad of Hummer Winblad and met with some of the night’s honorees: tech writer Steven Levy (who just moved from Newsweek to Wired), Qualcomm founder Irwin Jacobs, Netflix founder Reed Hastings, New Enterprise Associates general partner Forest Baskett, and Diane Greene, founder of VMware. They were the latest to join the Visionary list for the group, which promotes tech entrepreneurship in the valley and has given out the awards for 11 years now.

This was one of those events where the who’s who of Silicon Valley shows up, though gray hair was fashionable since the list included a lot of past visionaries. San Jose Mayor Chuck Reed told the crowd they were welcome to set up their innovative companies, particularly cleantech firms, in his town.

Baskett, former chief technology officer at the once-high-flying graphics supercomputer company Silicon Graphics and an ex-Stanford professor who played a big role in getting MIPS Computer Systems and Sun Microsystems off the ground, said he was as enthused as ever about tech in the valley. Cleantech is his latest investing obsession. Read the rest of this entry »

Here’s the latest action:

The AP tries to set a new standard, doesn’t follow it — The Associated Press wants bloggers to pay it for quoting excerpts of its stories, and is threatening to sue if they don’t. Of course, that position is kind of hard to take when you yourself don’t abide by such standards, as the AP didn’t when it lifted a quote from TechCrunch on the matter for one of its stories. Arrington rightly noted how ridiculous this was and contacted his lawyers about retreiving the $12.50 the AP would owe him under its ridiculous system. The hypocrisy runs deep.

Tesla looking for another $100 million — The electric car maker’s plan is to push production up to 150 cars a month by the end of the year, according to VentureWire. To do this it needs more cash. It will likely get it. Enough said.

One former Yahoo finds a home — While his former colleagues at Yahoo continue to jump ship, Jeremy Zawodny has found a home: Craigslist. No word on his official title, but he will start in July.

An EA bigwig leaves to start his own company — Neil Young, a veteran of the gaming powerhouse Electronic Arts will leave to start an unspecified “new project,” according to Newsweek’s Level Up blog. During his 11 years at EA, Young worked on projects such as the alternate reality game Majestic, The Lord of the Rings: The Two Towers, The Sims 2, Medal of Honor Airborne and Boom Blox (which is perhaps my new favorite game).

FCC gives Sprint more time to give up part of its airwaves — The regulators agreed to push out a deadline for Sprint to vacate a part of the wireless spectrum it controls that the government now wants to use for public safety networks. Sprint will now have until July 1, 2009.

NVIDIA chip to match AMD’s manufacturing process — The Nvidia GeForce 9800 GTX+ is made on a 55-nanometer process, according to CNET. This is the same process that most of AMD’s graphic chips now use, an upgrade from the 65nm process.

The Japanese love/hate the iPhone — A recent survey indicated that 91 percent of Japanese buyers would not purchase an iPhone. A headline like that makes it sound awful, until you consider, as Silicon Alley Insider does, that even 9 percent of Japan’s market would mean 9.3 million potential new iPhone customers, which is huge when Apple had been shooting for just 10 million worldwide by the end of 2008.

The Huffington Post goes local — The fast-growing web site, The Huffington Post, run by pundit Arianna Huffington, is planning a massive expansion across the U.S. The first of these local versions of the site will be run out of Chicago. Huffington is said to be looking for a third round of funding to support such an expansion.

Fake Beijing earthquake news spreads malware — Botnet operators in China are using fake reports of a 9.0 earthquake to spread malware, according to The Register. Classy.

Netflix shuts down profiles feature — Users will no longer be able to have seperate queues for movies as a result. The system was simply too complicated to maintain, Netflix contends.

The first phase of Netflix’s plan to enter the living room is so far proving to be a success. Less than two weeks after the release of its set-top box made in partnership with manufacturer Roku, the device is completely sold out. It’s so popular, in fact, that the companies don’t expect the back log to clear up for perhaps two months.

Could we be looking at another Nintendo Wii situation?

That video game console was release in time for the holidays two years ago but sold out immediately. To this day it is still very hard to find one in stores. One of the reasons for its popularity: It’s compelling price. While a Wii is $249, the Roku is $99, making it perhaps even more enticing.

But there are major differences of course (aside from one being a video game system and the other a movie player), the Roku box requires that you have a subscription plan with Netflix. But seeing as the service has over eight million subscribers, many of whom already pay nearly $20 a month, it’s seems pretty reasonable to think that a lot of them will desire this box and availability could be limited for a long time.

Of course it’s important to note that actual sales numbers were not released. This seems similar to when Amazon’s e-reader device, Kindle, sold out very quickly yet no one had any idea how popular the device actually was because Amazon would not disclose how many were sold. It could have been 100, it could have been 100,000.

Netflix is planning to team up with other vendors to get its streaming video service on more devices as well later this year. One of these partners is known, LG, while others have been speculated upon, most notably, Microsoft which could use the service on its Xbox 360 gaming console. That would be a formidable pairing — especially for Microsoft rival Apple, which has its own set top box in the Apple TV.

When I said earlier that the digital movie distribution landscape is becoming a crowded place, I meant to say a crowded and combative place. At the All Things D conference currently going on in Carlsbad, CA, Walt Mossberg interviewed Amazon chief executive Jeff Bezos who mentioned that Amazon’s Unbox service will unveil a for-pay streaming service in the next few weeks.

Unbox currently offers the ability to download and rent movies, not stream them. While the immediate thought is that this is a response to Netflix, which allows users to stream unlimited amounts of select titles for free to their computers, and soon to their televisions with the Roku box, the key phrase in Bezos’ remarks is “for-pay.” To me that makes it seem more like a rental service — which Unbox already offers.

So what’s will be the point of the streaming service? Unfortunately, Mossberg didn’t have Bezos elaborate on his comments so we have absolutely no details other than it will be coming soon and will be a paid service.

I would speculate that this will be an unlimited streaming subscription service similar to Netflix, but Tech Trader Daily is reporting that the service will be a la carte. Which again, reeks of rental.

Perhaps it will work like this: you’ll pay a monthly fee and you have access to a certain number of films that month. For that to work, it would have to be a better deal than simply renting those movies at their current prices (most are $3.99). Basically, that would be a renting movies in bulk service.

As I said, that is just speculation, but on the surface a streaming service doesn’t seem to make too much sense unless it’s unlimited like the Netflix offering.

As we’ve discussed recently, there are a growing number of players in the online movie distribution field. Eventually, one way the winners are going to set themselves apart is by promoting content that others don’t have. Apple had that for a while with Disney movies. Not anymore.

Today, the digitial video recorder TiVo announced a deal with Disney to place its films on the device for rental. This service will be provided via a deal with CinemaNow, according to NewTeeVee.

Apple didn’t have an exclusive deal with Disney, but it was one of the only major players with both a download service (iTunes) and set top box (the Apple TV) to have access to the popular films. This was hardly surprising given that Apple chief executive Steve Jobs sits on Disney’s board of directors and is Disney’s largest individual shareholder (thanks to the deal made when Disney bought Jobs’ digital animation film house Pixar for $7.4 billion in 2006).

With Disney films now on TiVo, it makes the device a more compelling competitor to Apple TV (not that it wasn’t already given that it has DVR functionality while the Apple TV does not). It also indirectly gives a boost to iTunes competitor Amazon Unbox because that service is on the TiVo as well for movie downloads (though the Disney deal is separate from Unbox).

Even though it’s not yet the leader in movie downloads that it is in music downloads, it seems like Apple is being come at from all sides. Just a couple weeks ago, Netflix announced a new set top box with Roku that will allow subscribers of that service to access catalog content in their living rooms for free. The device is also significantly cheaper than the Apple TV ($99 vs. $229).

Now even Mickey Mouse has dealt a blow to Steve Jobs. Will he counter with an announcement at Apple’s WWDC event a week from Monday?

[photo: Disney]

Online movie distribution is becoming a crowded field. So crowded that casualties are already popping up.

You’ve most likely heard of the big names with online movie offerings: Amazon, Netflix and Apple. But perhaps you hadn’t heard of Vongo, a service run by the premium movie channel Starz, which launched late last year. That was part of its problem. Vongo is now all but dead.

The service won’t be officially killed off but Starz will stop promoting it. Eventually, this will kill it. Instead, Starz is going to focus its effort on a new offering, Starz Play, which will be offered in partnership with Verizon, according to The Los Angeles Times. For $5.99-a-month, subscribers will get access to Starz content over the Internet on-demand. These films will also work with select portable devices.

Basically this amounts to Starz taking on a partner, giving a price-cut and changing the name of its online video service.

Vongo is also subscription-based, giving users unlimited streaming access to its catalog for $9.99-a-month. The problem, according to Starz spokesperson Tom Southwick, was that the selection of films wasn’t broad enough, as he told The New York Times.

It’s unclear how this new Starz Play will fair much better given that it will presumably have the same content. Still, this new service will be available now on television, provided you have Verizon’s FiOS service. Otherwise, you’ll be right back online — basically with Vongo — with a new name.

While some will argue that Vongo’s example is exactly why the Netflix/Roku set top box won’t work, remember that it is basically a $99 one-time investment for a service you’re likely already paying for (Netflix). Vongo required you pay a monthly fee without having the bonus of the largest online DVD movie rental collection to fall back on.

After a lackluster start, things were starting to look good for the Apple TV device. With its 2.0 software update, the media streaming device was able to rent or purchase movies directly to television sets, play HD movies and thanks to a deal Apple cut with the major movie studios, had plenty of content. Just to top things off, Apple even cut the price of the device by $70. It finally looked like it could work.

It’s not looking so great now.

Tomorrow, Netflix will unveil a set-top box made by Roku. The living-room bound device will allow subscribers to the Netflix online DVD rental service to access thousands of movies and television shows instantly — for free. The device will be $99. Even after January’s price cut, the cheapest version of Apple’s device is $229. This could be big. Very big.

Sure, with the Roku device customers are still paying via their Netflix subscription fee (typically around $20-a-month), but they’d be paying that regardless. All those customers must do now is spend a one-time fee of $99 and they’ll be able to access around 10,000 titles at any time.

This current slate of 10,000 “Watch Now” (the name of its instant viewing service) titles may not seem like a lot when you consider that Netflix has over 100,000 DVD titles available. However, the number looks pretty robust when compared to the number of titles you can regularly watch on the Apple TV for free: zero.

The Netflix/Roku system won’t be without its flaws. As CNET points out, thanks to Hollywood’s licensing system, only two of the current top 100 DVDs on Netflix are available to watch instantly (you can currently use the service on a PC). Simply put, most of the titles available will be catalog films (movies that have been out for a while). Still, if I were a Netflix subscriber and these were free, I would have no complaints watching them.

Another problem is that it doesn’t appear the Roku will have any option to get newer content to the device even if you are willing to pay extra for it. This is a misstep. Netflix could make this device a killer if it simply would allow customers to pay a rate comparable to what Apple charges for new release movie rentals.

The device also has no hard drive, meaning that all content is streamed live over the Internet. If there is a hiccup in your connection — or if your connection is simply slow, this will obviously be a problem.

While CNET deems the picture quality “acceptable”, some will likely still pay to have the HD experience that other device including the Apple TV and Microsoft’s Xbox 360 offer. However, Wired reports that HD streams will show up eventually on the Roku device.

In another blow to Apple, the Roku device is said to be a snap to set up and work with (usually one of Apple’s strengths over competitors). You can even queue up movies from your computer to watch on your box. The simple remote that consists of only a few buttons even bares a resemblance to the Apple TV’s remote.

While everyone has known that Netflix had several set-top box partnerships in the works, one emerging this quickly is a surprise. Netflix and LG are said to also be teaming up on a box due later this year. Unnamed partnerships are also in the works for Netflix, the hottest of those rumors is that the service could team up with Microsoft to deliver Watch Now movies to the Xbox 360. As I’ve said before, this could be a true killer app. Netflix chief executive and founder Reed Hastings is on Microsoft’s board after all.

Read the rest of this entry »

Remember Lycos? Of course you do. Remember when you last used the site? Of course you don’t. Perhaps that’s exactly why the company’s taking the site in a new direction: video on demand (VOD) rentals.

Started as a Carnegie Mellon University research project in 1994, Lycos was one of the first web search engines. By 1999 it was one of the most visited sites in the world, then Yahoo and Google happened. While it still maintains respectable traffic worldwide, Lycos, now owned by Daum Communications Corp. (the second largest portal in Korea), is more than an after-thought in the web 2.0 world.

In 2005 the company decided to shift its strategy away from search to online communities and broadband entertainment. That transition continues today with the launch of Lycos Cinema.

An online video on demand service, Lycos offers both free and premium content. The free content is ad-supported, while the premium content takes a new approach: fees based on the number of “seats” — that is, how many people you want to watch the film with.

That’s the key component Lycos Cinema feels will set itself apart from the competition: social interaction. When you load up a movie, a chat room appears on the left hand side. Here, you can invite and interact with friends about the content you’re all watching. It’s a cute idea — in theory at least.

In reality there are problems. First, the content. To be frank, it’s awful. It’s not that I haven’t heard of all of the films (only most I hadn’t heard of…), it’s that there’s no way I would pay to watch most of them.

The second problem Lycos Cinema has is the competition it faces. In the growing field of VOD you have Apple’s iTunes movie rentals, Amazon’s Unbox rentals and Netflix’s Watch-It-Now, among others. All of them offer much better content at similar prices with a much better experience. Even the free stuff on Lycos can’t begin to compare with what the NBC and Fox-backed online video site Hulu offers.

The third problem, unfortunately, is that the site throws errors left and right. About half of the time most pages don’t load at all and instead spit out a code error. Even if I wanted to rent a movie, I might not be able to — it’s a total crap shoot.

If you are able to get to the featured rentals promo page, you’ll notice a top section that looks quite a bit like iTunes movie rentals’ CoverFlow view. It’s really kind of pathetic.

Lycos sold to Spain’s Terra Networks in 2000 for $5.4 billion. It was resold in 2004 to the aforementioned Daum Communications Corp. for $95.4 million. At that rate it’s due for another sale this year, priced to own.

You probably already know this, but the days of going to a video store are ending. Online DVD rental service Netflix announced its earnings earlier today and beat expectations in a number of key categories including profits (up 36 percent) and subscribers (up 21 percent).

This news makes former industry giant, Blockbuster, look even more foolish. Blockbuster, which has been trying to compete with Netflix in the online DVD rental business, has been mired in bad financials for years. Held down by an albatross around its neck, which used to be its greatest assest — its brick and mortar stores — the company is struggling to define itself in the 21st century. A couple weeks ago, it made an almost humorous attempt to buy fellow lackluster company Circuit City. We’re still wondering why that makes any sense.

But not all is great for Netflix either. The company’s stock actually fell despite the good news today because the outlook for the future is less sunny. The cost of building its online movie download service led the company to lower expectations on earnings per share. Netflix could actually find itself in a similar situation to Blockbuster soon as it must transition its business to a new model with the inevitable rise of digital movies.

However, by taking these hits now and putting an infrastructure in place to compete in the digital realm with the likes of Apple and its iTunes movie rental store, Netflix is thus far proving it doesn’t want to end up like Blockbuster.

The race for the living room is on. Apple and Microsoft are already there with the Apple TV and Xbox 360 devices that can stream movies to televisions, but neither are a dominant force yet. Netflix has already said it would team up with LG to make a box to stream its movies to the living room, but today it announced further partnerships in place (it declined to state the other companies aside from LG) to ensure it has a set top box that can grab a foothold.

Blockbuster is said to be entering the living room race as well, and as long as it is there to beat up on, Netflix should be just fine.

[photo: flickr/brymo]

Blockbuster was once a name synonymous with movie rentals. Then Netflix, the online DVD mailing service, came along and stole some of that luster. Recently, as the transition to digital distribution for home movie rentals/purchases has begun, Blockbuster has seemed almost comically behind. That reputation could get worse with the company’s offer today to buy number two electronics retailer Circuit City.

The $6 to $8 a share dollar cash offer, which could be worth as much as $1.3 billion, simply does not make a lot of sense. Blockbuster notes that the combination would make an $18 billion global enterprise, but a lot of companies can be crammed together and a big number thrown out there; it doesn’t mean they should be.

Both Blockbuster and Circuit City have been struggling amid strong competition from the likes of Netflix and Best Buy respectively. Both have stocks that have been bottoming out recently — Circuit City’s stock was trading at just under $4-a-share before the deal, Blockbuster’s was even worse, closer to $3. If stock prices are any indication, investors don’t understand this deal either — at least for Blockbuster. While Circuit City is soaring, up nearly 30 percent on the news, Blockbuster is tanking, down almost 13 percent right now.

Both companies had some positive news recently. Blockbuster finally appeared ready to take digital distribution seriously with talk about entering the the living room set top box game and saw profit climb on some cost-cutting the company has been doing. Circuit City also cut costs last quarter and pulled in a profit. This deal looks to negate these slight turnarounds.

A private offer is said to have been made before Blockbuster took a page from Microsoft’s book in its pursuit of Yahoo and took the deal public. Now, Circuit City seems just as confused as all of the analysts about the deal. Circuit City has issued a statement questioning if Blockbuster could even finance such a deal:

Among those questions are whether the proposed acquisition would require a refinancing of the existing Blockbuster debt, and if so, what would be the terms and structure of any new debt; how large a rights offering would be required to fund the transaction and what steps Blockbuster has taken to provide a backstop to ensure successful execution of the rights offering contemplated; and what precise internal and external approvals Blockbuster anticipates for a proposed transaction, including approval of the contemplated rights offering by Blockbuster shareholders and registration of the offering with the Securities and Exchange Commission.

Michael Pachter of Wedbush Morgan Securities also questions the financing of such a deal:

Our initial analysis of the deal leads us to tentatively conclude that Blockbuster intends to raise around $500 million through a rights offering, plus an additional $500 - 800 million in incremental debt. The combined company would have around $120 - 150 million of EBITDA before synergies, implying a debt to EBITDA ratio of 6 - 11x. It is not clear to us that Blockbuster will succeed in financing this transaction.

He goes on to note:

We think that Blockbuster’s move is premature, and borders on being reckless. Circuit City runs its business as a “big box” retailer, and its business is particularly challenged by a worsening economic environment, a well-run competitor, and a constantly changing product offering.

One major problem Blockbuster has had in the Netflix world is that its brick and mortar stores cost too much money to operate. That is exactly why it decided to close hundreds of them. Little did anyone know that the plan then included buying another company’s struggling brick and mortar stores.

[photo: flickr/Elise esq]

YouTube will contribute to valley’s allure — Two years ago, Google’s buzz, even before its IPO, gave entrepreneurs like Tribe’s founder Mark Pincus inspiration to dream up the social networking revolution. YouTube’s grand sale will also inspire a new wave of entrepreneurs, no doubt. The WSJ has a timely piece — written before YouTube’s sale was announced — about the entrepreneurs still coming to Silicon Valley.

There’s Matt Sanchez, co-founder of video company VideoEgg, who found he was spending more time in Silicon Valley than his home in New Haven, so packed a 12-foot U-Haul van with his servers and other junk, and moved out here. It has paid off. His team of four have since landed venture money, hired 22 more people, and signed lots of deals with Web sites, most of them within an hour’s drive. “There’s a unique set of resources in Silicon Valley that don’t exist in other places,” Sanchez, 25, told the Journal. And then there’s Metacafe, the Israeli video site, which just opened a Palo Alto office, and plans to hire 12 people by the end of the year.

How things change. We still remember the NYT trying to compare Silicon Valley with Detroit, back when it was fashionable to bash this place — and th was as recent as early 2005!

MySpace cleared — The suit filed by Brad Greenspan, the former chief executive of MySpace, against the popular social networking site, has been dismissed.

MeeVee’s logo sign — Meevee, the personal TV and entertainment guide company, is going to some lengths to build branding, putting up a large logo on its building and filming it, reminding some of the bubble era. It has raised $20 million in venture capital.

Microsoft offers mobile ads too –Google and Yahoo offer sponsored ads besides search results on your mobile phone. Now Microsoft has joined them, but offering click-to-call technology too — which is where you see an ad, click on it, and your phone dials the advertiser.

Google and Zoho gunning for online office software leadership — We’ll be moderating a panel tomorrow at the Office 2.0 Conference in San Francisco. We recently wrote about Zoho’s impressive product release schedule, apparently an effort to steal the thunder from Google. Zoho has now incorporated its array of software, including a new calendar and a new email feature, under one roof called Zoho Virtual Office. Meanwhile, Google does its own integration, linking up Writely and Spreadsheets with Docs & Spreadsheets.

Tellme Networks making headway in voice recognition — Speaking of the competition in mobile search, Tellme has been around a long time as a private company, based in Mountain View, and is getting a second wind. Back during the Internet bubble days, it was laying off workers. Now that voice recognition has become hot, it has just signed a deal with Cingular Wireless to offer a 411 information service that will allow Internet searches too. It is now handling more than two billion directory calls a year, 74 percent of which are done without human intervention, according to the NYT.

Netflix’s recommendation technology beat within a week — Netflix, the popular DVD site, offered a prize to anyone who beat its recommendation algorithm. Within a week, a team from WXYZConsulting.com in Los Gatos beat Netflix. The team is led by data mining engineering professor named Yi Zhang, of UC Santa Cruz (pictured here).

Sequoia Capital is almost out of Google — We’ve mentioned venture firm Sequoia’s various conflicts and interests related to its backing of Google. But lately, the venture capital firm’s holdings in Google have dwindled to about 0.1%, according to a filing in April by the SEC. That leaves it with 412,823 shares, worth less than $200 million.