I’ve been looking forward to the fruits of the TiVo/Netflix partnership for some time now so this is kind of a bummer.

From Reed Hastings, Netflix CEO, during their earnings conference call yesterday:

Well, DVD and High-Definition DVD show great promise. The near term for downloading is not so bright. TV channels such as NBC, Starz, and TNT have been paying large sums for many years to have and maintain exclusive access to many studio films. Because of this, Movielink and Comcast, despite impressive technology and management, have so far been unable to license most of the 50,000 titles available on DVD. The same holds true for Apple which recently launched their Video iPod with essentially no studio movies.

Of course, we face the same obstacles as Movielink, Comcast, and Apple in terms of licensing for downloading. As such, we are going to hold off on the launch of our movie downloading service. We will continue to enhance our technology and infrastructure and we will be ready to quickly launch when the content climate begins to thaw and it becomes possible to deliver a compelling consumer experience.

How long will it take and who will help us to get there? Interestingly, while you might think of Comcast, Movielink, and Apple as our potential competitors, they are for now our allies. We all four want broad, non-exclusive licensing of movies as with music today. Our shared opponents are the TV channels who pay large sums to get multi-year exclusive access to studio films.

In the music context, imagine if Clear Channel or XM had paid big money to get 5-years of exclusive rights to all Warner music and that the entire Warner catalog was not available for legal downloading. That is the current movie situation which is why no one has been able to license the 50,000 DVD titles for downloading. This will shift over time as those exclusive contracts are re-negotiated and Netflix and its allies can collectively deliver more profit to the studios than the exclusive TV channels. And when the content climate does shift we will have broad-camp(?) content for downloading and the next generation of movie delivery will begin in earnest.

Whether this happens in 2 quarters or 20 quarters is hard to say. In the near term fortunately, DVD is king. Netflix continues to grow rapidly and we prepare for the emergence of downloading in the future. As we grow towards our 20 million subscriber goal, we are comforted by the reality that the bigger we are when the content logjam breaks, the more likely we are to be one of the leading companies in the downloading space.

Later in the call:

Analyst: Can you update us on where you are with the TiVo arrangement given what you’re talking about downloading does that mean that that’s done and over with or is that still proceeding or what’s happening there?

Hastings: Yeah, there’s no work going on right now. We love those guys, we just don’t have any content so there’s not really any point of doing anything at this point.

Posted by Roger at 8:01 am.