Two media companies have teamed up to bring you a choice of streaming media. The collaboration fulfills a promise made in 2004 when DVR pioneer TiVo and online DVD rental trailblazer Netflix set out to develop a system for delivering video directly over the Internet. But they got sidetracked after Netflix couldnt work out licensing deals with movie and TV studios.

By the time Netflix cleared the licensing hurdle and launched its Internet streaming service 21 months ago, the two companies had decided to pursue other partners.

But a reconciliation was inevitable, according to the leaders of Netflix and TiVo, whose Silicon Valley headquarters are about 18 miles apart.

“Its just a natural pairing and we are thrilled to finally be working with them,” said Reed Hastings, Netflixs chief executive officer.

“I dont think there is any question we have gotten more frequently than, `What about TiVo and Netflix working together?” said TiVo CEO Tom Rogers.

Coming off the first back-to-back quarterly profits in its 11-year history, TiVo is betting its ties to Netflix and other content providers like Amazon.com Inc. and Google Inc.s YouTube will help distinguish its $299 DVRs from the generic recorders peddled by cable TV providers.

Alviso-based TiVo ended July with 3.6 million subscribers and Los Gatos-based Netflix ended with 8.7 million subscribers. The streaming service is available at no extra charge to any Netflix subscriber paying at least $8.99 per month for DVD rentals – a prerequisite that most customers meet.

TiVo will join other companies that sell devices that make it easier for Netflixs streaming service to be shown on a TV set instead of a computer.

Since Silicon Valley startup Roku Inc. introduced a $100 player tailored for Netflixs streaming service five months ago, Microsoft Corp. has agreed to tweak its video game console, the Xbox 360, so it can draw from Netflixs Internet library beginning next month. And both LG Electronics and Samsung Electronics are selling Blu-ray DVD players compatible with Netflixs streaming service.

Netflix eventually hopes to have its streaming service on dozens of devices, including TVs with built-in wireless connections to the Internet.

The growing selection of streaming devices could help boost Netflixs profits by causing subscribers to request fewer DVDs. Each DVD rental makes a round trip through the postal service that costs Netflix 84 cents, so fewer requests will lower expenses – just as management is striving to save money to offset slowing revenue growth.

“Netflix has really stumbled upon something thats pretty clever,” Pachter said. “Its kind of a win for everyone because the customer gets the instant gratification of watching a movie over the Internet, studios get more licensing fees and Netflix saves money.”

Source: caang