Amazon, TiVo to test movie downloads direct to TVs

A screen shows Internet services available through an broadband-connected TiVo digital video recorder at the Consumer Electronics Show in Las Vegas, January 5, 2006. Amazon.com Inc. and TiVo Inc. will begin testing on Wednesday a service that lets users watch videos rented or bought over the Internet directly on televisions, as part of a trend to link personal computers and TVs.

NEW YORK (Reuters) - Amazon.com Inc. and TiVo Inc. will begin testing on Wednesday a service that lets users watch videos rented or bought over the Internet directly on televisions, as part of a trend to link personal computers and TVs.

The announcement from the two companies comes a day after Wal-Mart Stores Inc. introduced a test version of its video download service, which is the first by a major retailer to have the backing of all Hollywood's major movies studios.

TiVo shares climbed 5.5 percent to $5.78 on Wednesday after the news was released, while Amazon rose 3 percent to $39.44.

Amazon's TiVo partnership extends the online retailer's Unbox download service, and takes it one step further than online video stores like Wal-Mart's or Apple Inc.'s iTunes, which are geared toward computers or portable devices.

Movies and TV shows from "Amazon Unbox on TiVo" will be available to download to a customer's TiVo box from computers for playback on their television set.

"It's one thing for viewers to be looking at YouTube content online, but when it comes to full-length television and movies, for most people, it's not television until it's really on the TV," TiVo Chief Executive Tom Rogers said in a phone interview ahead of the announcement.

The test service comes as media and technology companies experiment with new ways to court viewers who split their time between viewing traditional media, surfing the Internet and playing video games.

At the same time, movie studios want to protect highly lucrative DVD sales against new Internet video outlets. This year could be the first year that consumer spending on DVDs falls, according to Pali Research analyst Richard Greenfield.

For TiVo, Unbox adds another factor that differentiates its video-recording technology from generic digital video recorders offered by cable and satellite providers.

Citigroup analyst Tony Wible said the agreement will likely lead to more subscribers to TiVo's service, but warned that there may be some hurdles left to jump.

"We would remind investors that while the partnership with Amazon helps overcome some of the technical limitations for downloading, we still have legal and economic issues that may limit content availability and prevent downloads in the near term from becoming mainstream," he said.

TiVo subscribers pay about $15 to $20 a month for the service, which lets users watch Internet video and listen to music and has security features for children.

The service will now let TiVo subscribers rent or buy films and TV shows from studios and networks including CBS, News Corp.'s Fox Entertainment Group, General Electric Co.-controlled Universal Studios Home Entertainment and Time Warner Inc.'s Warner Bros. Entertainment.

Viewers must buy their video, or pay for the rental, from PCs. TiVo downloads will count against a two-PC limit on Unbox purchases, though Unbox users can still download the shows to two handheld devices. The content cannot be burned onto DVDs.

Customers can buy TV episodes for $1.99, most movies for between $9.99 and $14.99, or rent movies starting at $1.99. Purchased videos are stored in each customer's personal list at Amazon.com for future access.

Amazon and TiVo are testing the new system, which is expected to be available soon, on more than 1.5 million TiVo boxes with high-speed Internet connections.

Hollywood movie studios have supplied content for several years to movie download services such as CinemaNow and Movielink, although the services have not achieved widespread adoption. Retailers have been wary of the trend, worried that the downloads will crimp their DVD sales.

Viewers are not currently able to purchase Unbox titles directly through their TVs, but that is something the two companies are exploring, TiVo's Rogers said.