We caught up with Netflix CEO Reed Hastings at the movie rental company’s event where it awarded a $1 million prize after a contest aimed at improving the accuracy of movie recommendations. He spoke about his hopes of working with Apple on the iPhone, the possibility that YouTube will beef up its movie service, and the future of the DVD.

Reuters: What will Netflix subscribers gain from the improvements in the recommendation system?

Hastings: It’s doubling the quality of our movie recommendation and that helps our subscribers get more enjoyment from movies. Because more often they love the movie they watch. More often the movies recommended will will turn out to be movies that you love. If you watch a couple of movies and don’t like many, you start to watch (sports and other programming). If every movie is incredible, you start to watch more.

Reuters: Netflix video streams on Microsoft’s Xbox Live system. What about the PS3 and Wii?
Hastings: Eventually we want to be on all the game consoles, all the Blu-ray players, all the Internet TVs. So we are working in parallel with all of those efforts. Currently our Xbox deal is exclusive and we haven’t characterized it more than that.

Reuters: Any plans to work in partnership with Apple and the iPhone?
Hastings: it’s something that’s likely to come over time. But nothing in the short term. (With) movie watching, we are not focused on mobile yet, but (instead) on the TV, on Blu-ray and on the video game consoles. We will get to mobile eventually, including the iPhone.

Reuters: What of Youtube’s potential movie service?
Hastings: I think there will be a lot of competition in this market: Hulu, Apple, Amazon, Youtube, Blockbuster. Internet video is a huge opportunity. And there will be a lot of people engaged, and that is going to be great for the consumer. All of us are going to innovate and compete with each other and provide more and more value to the consumer.

Reuters: How far along are we on the transition to all digital video watching?
Hastings: There will be people doing DVD-by-mail in 15 or 20 years, so I think DVD will last a long time. Our best guess is that DVD will peak for us in 5 or so years. But it is continuing to grow. And the streaming is exploding. So we are getting nice growth in the DVD side and huge growth on the streaming side.

Reuters: What do you make of Blockbuster’s store closing plan?
Hastings: Blockbuster and Redbox really compete on  doing the inexpensive new releases, and we are much more the streaming and the catalog. Their closings don’t really benefit us. It will benefit Redbox more than it does us.

Reuters: Have you been approached about an acquisition or partnership?
Hastings: We don’t comment and any acquisition prospects.

(Photo: Reuters archive)

Here’s the thing about Blockbuster: like other cultural icons, its synonymous with its service — renting movies from a local store.

Sure it does other things, rents video games, sells gadgets and point-of-sale popcorn, but most of us hear the name Blockbuster and do a quick mental check — “did I return that rental copy of “To Sleep With Anger”? (Ok, maybe that’s just me.)

But even with the spectre of looming debt, and market talk that bankruptcy might be an option it’s exploring (an idea the company flatly denied), Blockbuster is mapping out a future where Blockbuster = Movies (not so much on the “local store” part).

Its latest step on that path is a partnership that lets TiVo’s subscribers access (later this year) movies and video from Blockbuster on Demand. It joins TiVo’s roster of other video suppliers — Amazon, Jaman, YouTube, CinemaNow and Blockbuster’s archrival Netflix.

Although mentioned quietly as an aside in an Interview, Blockbuster executive Kevin Lewis also reiterated that Blockbuster is “enabling the Apple ecosystems” in its own services, which could someday mean a marriage of sorts between the video provider and the iPhone.

It’s too soon to tell if that is enough to help. But is that enough to withstand the onslaught of video available to a changing demographic that thrives on free video from myriad sources (some illegal). At least shareholders are pleased. The battered stock is up more than 17 percent today.

Then again, blogger Dan Frommer calls the TiVo-Blockbuster deal “insignificant.”

What do you think?

Keep an eye on:

• Houston Chronicle lays off 12 pct of staff. (Houston Chronicle)
• Facebook may tweak its layout… again. (WSJ)
• Google top execs keep $1 paychecks (AP)

(Photo: Reuters)

Because of a big upcoming debt payment — and a stock price of about 14 cents a share — Sirius XM Satellite Radio finds itself in quite a predicament.

This, apparently, hasn’t been lost on EchoStar’s Charles Ergen, who may be getting ready to take over the company.

According to the Wall Street Journal, Ergen has recently acquired part of a $300 million tranche of Sirius debt that matures on Feb. 17: “Sirius recently converted part of the debt to equity, reducing the total debt outstanding to about $175 million. It isn’t clear whether Mr. Ergen participated in the exchange, however. Mr. Ergen could also be buying up senior bank debt, due in May, which trades thinly on the over-the-counter market.”

Given all this, we now offer some food for thought:

1. How does Sirius XM’s Mel Karmazin feel about all this? After all, he is a well-known dealmaker. Is he ready to sell? Ergen could be doing him a favor.
2. If this does pave the way for an EchoStar takeover, would such a deal even make sense? Is there any business wisdom in combining satellite radio and satellite TV?
3. And where would such a deal leave Karmazin? Satellite radio has been his baby, would he leave the game altogether? If not, then how could he work with Ergen? Remember, Karmazin and Sumner Redstone? Not exactly a match made in Heaven.

Keep an eye on:

• Hollywood may at last be having its Napster moment — struggling against the video version of the digital looting that capsized the music business (NY Times)
• Warner Music Group posted better-than-expected results on Thursday, despite falling CD sales and slower growth in digital revenue (Reuters)
• Online DVD company Netflix Incon said one million Microsoft Xbox 360 video game console users have activated Netflix’s movie streaming service in the three months since the two companies formed a partnership (Reuters)

(Photo: Sirius XM Chief Executive Mel Karmazin/Reuters)

 Netflix Inc <NFLX.O> apparently didn't get the memo: there's a recession on.

The online DVD rental company is aiming for "at least" 12 percent net earnings growth in 2009 and will invest any "surplus profit" -- terms not heard much on Wall Street these days -- in growing its subscriber base and streaming content, Chief Executive Reed Hastings told investors on Monday.

The comments, made amid a storm of bad news from other U.S. media companies, came as the Los Gatos, California company posted a 45 percent rise in quarterly profit that even its own executives weren't expecting.

"Our October forecast of slowing growth turned out to be wrong," Netflix CFO Barry McCarthy admitted on a conference call with analysts. "We continue to see strong momentum in our business, quarter to date."

And then there was this: McCarthy said so many Netflix users are streaming content to their PCs and set-top boxes that they aren't ordering as many DVDs online. This equals fewer costs and more profits if this streaming thing takes off.

The relentlessly cheerful news continued: Netflix is still hiring! It is testing weekend shipping in some markets to speed service! It is within 0.4 percent of the 10 percent improvement it sought in its movie recommendation algorhythm!

On and on: More subscribers are upgrading to more costly plans than are cutting to cheaper plans! Free cash flow and gross subscriber additions hit a new record! "We will reach 10 million subscribers this quarter!" Hastings said.

The company says no data supports the idea that its growth is due to "cocooning" consumers who are trading expensive trips to the movies for DVDs -- so rivals can't even feel the satisfying schadenfraude of knowing that Netflix is profiting from misery.

What's with this company? Don't they know there's a recession on?

In tough times, perhaps the maxim "beauty is in the eye of the beholder" is even more true.

In the eyes of Blockbuster CEO Jim Keyes, your local video rental joint is a kind of temple for story-loving consumers anxious to find just the cinematic gem they most desire, so they can "Go Home Happy." That's what makes it different than online video rental shop Netflix, right, Jim?

Reuters:

Given the economic concerns, and as you eye staff costs, might you perhaps automate the in-store movie checkout process? Maybe eliminate the kid behind the counter?

Jim Keyes:

This is an art - it's movie matchmaking. It's a very important art that we are trying to bring back into our culture, rather than replace with a computer. And we think actually it represents a point of differentiation for Blockbuster to have that person at point of sale to talk to...  So it's actually quite the opposite. Much of the savings that we have found in other areas we have been trying to redeploy back into the store to enhance the store labor.

What's that you say, dear reader? Your local Blockbuster's employees are more like teenage mallrats than movie matchmakers? Tell it to his boss. Or in our case, his boss's boss's boss.

Reuters: But my guy at my blockbuster isn't quite there yet...

Jim Keyes:

He's not there yet? We've got a little training opportunity? (he laughs, while quietly pulling out his Blackberry). Which store is it?

Reuters: Forest Hill, New York (just east of Manhattan)

Second Reuters Reporter: Yeah that's not a very good one...

Keyes: (Still smiling, but quickly thumbing his Blackberry)

I think we can handle that.

(Dear Forest Hills Blockbuster employees: Ummm, Sorry. All the best, Reuters)

(Photos: Keyes, Reuters; Employees, Blockbuster.com)

Blockbuster got into the set-top box game right in time for the holiday season with a new digital media player that brings fewer but newer titles from the Web to TV six months after arch rival Netflix launched its $99 Roku set-top box. Netflix followed that launch with similar partnerships with Tivo, Samsung, LG Electronics and Microsoft.

And that’s just the tip of the iceberg. While the number of people who watch movies or TV via the Web is still small, media and technology executives believe a host of new technologies will make Web to TV a mainstream staple. Vudu already sells a $299 set-top box that lets users download TV shows, while Microsoft’s Xbox 360 and Sony’s PS3 game consoles can also be used to download programming from the Web for TV viewing.

Apple of course is trying to take a bite of the market with its Apple TV device that lets viewers download shows from their computers onto their TVs.

This could save consumers a lot of money– bypassing the need to pay hefty cable fees — and a lot of time when you factor in all the hours spent watching commercials. These devices do require fast Web connections, but market researcher Gartner forecasts there will be 499 milion residential broadband subscribers globally by 2012, up from 323 million at the end of 2007.

Blockbuster said its MediaPoint set-top box, made by broadband device maker 2Wire, allows customers to download high-definition quality movies to their TVs via broadband lines for $1.99 apiece, after an initial $99 for the box and 25 films.

Consumers have 30 days to watch a film once it is downloaded to the set-top box, and must finish watching it within 24 hours of pushing the “play” button. The service, called Blockbuster OnDemand, can be ordered at http://www.blockbuster.com beginning on Tuesday.

Unlike Netflix’s “Watch Instantly” feature, which streams movies to subscribers’ TVs or personal computers, the Blockbuster on-demand service will be open to customers who do not subscribe to its DVD-by-mail service, Blockbuster Online. Blockbuster Chairman and Chief Executive Jim Keyes said the company’s longtime emphasis on new releases draws different consumers than Netflix subscribers, who are directed by its Web site to older catalog titles.

The service is essentially a rebranding and expansion of Blockbuster’s Movielink.com Web site, which offers about 10,000 on-demand movies for download to personal computers. About 2,000 of those titles, such as recent DVD releases “Forgetting Sarah Marshall”, “Sisterhood of the Traveling Pants 2″ and “Get Smart”, can be downloaded to TVs via Blockbuster OnDemand, the company said.

Blockbuster’s also looking into packaging the new service with Blu-Ray DVD players and is considering alliances with video game console makers, but is not ready to disclose the details.

Remember that scene in the movie “A Clockwork Orange” when they force open Malcolm McDowell’s eyes and make him watch and watch and watch the screen some more?

That’s got to be what it’s like for the remaining two of the eight original contestants in the Movie-Watching World Championship.

The gang has been sitting in a tent in Times Square since Thursday (on the island formed by 43rd St and Broadway and Seventh Ave) doing nothing but watching movies and trying to stay awake. The winner gets $10,000 in cash, a lifetime membership to Netflix, the movie delivery service that is sponsoring the contest and the “Netflix Popcorn Bowl” trophy. (Netflix for its part cut its fourth-quarter forecast for revenue growth and subscriber on Monday, which took a Berlin Alexanderplatz-sized bite out of its stock price, so the contest might have proved escapist fun for the company’s executives.)

Gizmodo has the rules, but we bring you the entire movie list (57 scheduled titles plus 16 extras — just in case) with the running times in minutes.

There have been some replacements and cancellations, but for those of you who want to know what people have been staying awake all weekend to watch, here’s the list in its painful glory:

Iron Man 125
Best in Show 90
Ghostbusters 105
Inside Man 129
Elvira — Mistress of the Dark 96
The English Patient 162
The Matrix 136
Terminator 2: Judgment Day
Aliens 154
Dodgeball 92
A Night at the Opera 92
Star Wars IV: A New Hope 123
Willy Wonka and the Chocolate Factory
West Side Story 152
Fletch 98
Baby Mama 99
Batman Begins 140
Spider-Man 121
Superman II 127
On the Town 98
Braveheart 177
Rent 135
Young Frankenstein 102
The Sound of Music 174
Raiders of the Lost Ark 115
Fearless 104
Silverado 133
Memento 113
Meatballs 94
One Crazy Summer 93
Can’t Hardly Wait 101
Dave 110
The Manchurian Candidate 127 (Original version)
The American President 115
Rudy 114
Leatherheads 114
Friday Night Lights 118
Saawariya 138
Casino Royale 144
Mr. and Mrs. Smith 120
The Bourne Identity 119
The Peacemaker 124
I Am Legend 100
Sweet Smell of Success 96
The Sure Thing 95
When Harry Met Sally 96
The Secret of My Success 111
The Insider 158
How to Succeed in Business Without Really Trying 121
The Devil Wears Prada 109
The Hunt for Red October 135
Apollo 13 140
Chariots of Fire 124
Miracle 136
Clerks 92
The Court Jester 101
Bob Roberts 102

EXTRA/EMERGENCY DVDS:
Remember the Titans 114
Baby Mama 99
Enchanted 107
Doctor Zhivago 200
Dead Man Walking 122
Star Wars IV: A New Hope 123
Jaws 124
Chicago 113
Dances With Wolves 236
Singin’ in the Rain 103
Die Hard 132
Grease 110
Clerks 92
Bad Boys II 147
Braveheart 177
Hairspray 117

(Photo courtesy of Wikipedia)

Barry Diller is not backing down. The media mogul’s IAC/InterActiveCorp has once again relaunched its Ask.com search engine — aiming to increase its share of the lucrative Web search market.

Ask.com Chief Executive Officer Jim Safka told Reuters in an interview  that the revamped site — with its faster, better searches — would keep customers coming back for more. He said early tests showed a 16 percent increase in the rate at which customers returned to the search page.

The problem is that Ask.com has a long way to go. Google is the dominant Web search service in the United States, growing in August to more than 63 percent market share, according comScore, a Web audience measurement firm. Yahoo was second with a fall to 19.6 percent share and Microsoft dipped to 8.3 percent. Ask was fourth, growing slightly to 4.8 percent.

And, as the Wall Street Journal points out, this isn’t Ask’s first effort at redesign:

IAC first shifted away from the hallmarks of Ask Jeeves, which was known for answering search queries posed as questions. Then last year Ask tried again with the tech-savvy redesign, Ask3D.

Prior efforts haven’t lifted Ask above a minor competitor in the internet search business.

Still, Safka makes this effort sound promising. Reuters reports that “if a user searches for ‘What’s on TV tonight?’ the results will bring up licensed TV listing results for the user’s local cable operator based on their IP address or if the user types in a local zip code.”

Ask.com efforts come at a crucial time — the search market is in flux with all the major players having talked to one another about various partnerships and deals. If only Ask.com could tell us what the search market will look like a year from now… 

Keep an eye on: 

• The principals behind DreamWorks SKG and Paramount Pictures sealed their parting of ways on Sunday, allowing the DreamWorks studio to tie up with Reliance ADA Group of India to start a new film company (Reuters)
• EBay Inc plans to cut its workforce by 10 percent and expects to exceed its third-quarter earnings forecast (Reuters)
• Netflix Inc., the online DVD rental company, said its fourth quarter revenue and subscriber figures would fall short of expectations (Reuters)

(Reuters photo of Barry Diller)

Thanks Amazon! The online retailer put out a release this morning with some juicy details about Google’s new mobile phone — even as we’re still waiting for the official unveiling later today.

So, here’s what they say about the phone…

“The T-Mobile G1 is the world’s first Android-powered mobile phone in an exclusive partnership with Google. The T-Mobile G1 combines full touch-screen functionality and a QWERTY keyboard with a mobile Web experience that includes the popular Google services that millions have enjoyed on the desktop, including Google Maps with StreetView, Gmail, YouTube and others. ”

Amazon, which has a deal with Google related to the phone, also says that the phone will have “one-touch access” to Google Search and will allow access to Android Market, “where customers can find and download unique applications to expand and personalize their phone to fit their lifestyle.”

More details will be coming, including pictures. So stay tuned. While you do, read why some experts say the phone won’t be a game changer.

Keep an eye on:

• NBC Universal will present a sweeping new study this week showing that audiences recall advertisements far more clearly when they are run on both TV and the Internet, findings that could change the way commercial time is bought (Reuters)
• Online movie rental company Netflix has signed agreements with the CBS Corp and Walt Disney Co’s Disney Channel that will allow current season episodes of a number of TV shows to be streamed at Netflix (Reuters)
• Time Inc’s “Life” magazine is being brought back as part of a joint venture that will launch a Web site offering photos (NY Post)

(Photo: Reuters)

Google and Viacom reached a late night accord on safeguarding the anonymity of Google YouTube viewers. Google will no longer have to hand over the user names and IP addresses of its viewers.

But what of the scuffle around the viewership data of Google and YouTube’s own employees? CNET’s Greg Sandoval reported last week the negotiations stalled on Google’s unwillingness to turn over information on its own employees, citing unnamed sources.

In other words, how would Viacom’s $1 billion copyright infringement suit against Google turn out if the data showed YouTube co-founder Chad Hurley viewing and uploading “Colbert Report” videos?

No word on this yet.

(Reuters)

Keep an eye on:

• Microsoft says the Xbox 360 will outsell Sony’s PS3 over the lifetime of the consoles. (Reuters)
• Provigil: the drug of choice for Silicon Valley entrepreneurs. (TechCrunch)
• Carl Icahn to Yahoo’s Jerry Yang: “‘I like you, but I have to get rid of you.” (NYTimes)
• AOL launches personal finance site Walletpop. (Reuters)
• Netflix subscribers can soon watch streamed movies over the Xbox 360. (Reuters)

(Photo: Reuters / Andrew Winning / Protesters take part in an Amnesty International demonstration in Belfast (2008))