The article sent shockwaves throughout Wall Street, as the stock prices for both TiVo and Netflix shot up. Last September, a Newsweek article reported that TiVo and Netflix might be getting together to produce a true form of video-on-demand (VOD). Last week, a Netflix official fueled this speculation by dropping hints about a potential joint venture. TiVo, the original and premier provider of digital video recorders (DVRs) in the U.S., would eventually provide instantaneous online access to the entire DVD library (currently more than 35,000 films) of Netflix, the nation’s number one mail order video rental service. This would be accomplished via a broadband internet connection to specially equipped TiVo DVRs. This development could also spell the beginning of the end for premium movie services like HBO, Showtime, and Starz.
First, let’s put all of this into perspective with a little history of the premium services. Home Box Office (HBO) was the first premium service, debuting in 1975. It was one of the first channels beamed from a satellite and carried by cable operators across the country. As its popularity grew in the late 1970’s, several other premium services like Showtime, Cinemax, The Movie Channel, as well as some lesser known premium services came into existence. The industry started consolidating in the early 1980’s as HBO bought Cinemax, Showtime bought The Movie Channel, and those lesser known services went belly-up. In the early 1990’s, the Starz-Encore networks debuted to compete with the HBO and Showtime networks.
During the mid-1990’s, as satellite services such as Directv and Dish Network debuted, the premium services began offering