With New Netflix Button, Mutual Love Affair With CE Industry Continues

The mutual love affair between the consumer electronics industry and Netflix continues on, with today's announcement that 11 different CE companies will create a dedicated Netflix button on their remote controls for certain connected TVs, Blu-ray players and set-top boxes. The unusual move is the latest sign of how interdependent the success of CE companies' connected devices and Netflix's burgeoning popularity have become.

The love affair was born out of CE companies' recognition of the old adage that compelling content and applications are critical to inducing consumers to buy the next snazzy gadget. Case in point: Blu-ray disc player sales were stagnating until connectivity was added, enabling access to Netflix and other streaming content. As a result, in the first 9 months of 2010, around 2.4 million players were sold in the U.S., up 96% from the prior year's period, according to NPD Group.

CE companies have prominently featured the Netflix logo (and others, like Pandora, Amazon VOD, Hulu Plus and YouTube) in their promotions and packaging, to drive home their devices' value proposition. But as NPD also points out, Netflix content is king: 57% of connected TV users primarily access Netflix, 10 percentage points more than access YouTube, the clear 800-pound gorilla of the online video industry. I'd be willing to bet that accessing Netflix is actually the sole reason for many who have recently bought a connected device.

As connected device sales have soared, prices have predictably dropped. As I pointed out in November, prices of two of the most popular connected Blu-ray players, the Samsung BD-C5500 and BD-C6500, had dropped to $109 and $132, respectively, well into the mass-market purchase zone. Meanwhile Roku and Apple TV allow Netflix streaming for under $100.

For its part, Netflix has been very clever by aggressively integrating its streaming client software with virtually every connected device available (250 by the company's latest count). This in turn has meant that its subscribers have lots of choices and flexibility for how to watch Netflix streaming on their TVs.

The CE industry and Netflix both clearly recognize the mutual benefits, and the new dedicated remote control button simply deepens the relationship. In reality, making Netflix accessible through one click doesn't create massive new convenience; rather it give CE companies a sexy new feature to tout, once again leveraging the Netflix brand to drive more sales. For Netflix, it gets the equivalent of valuable beach-front real estate, while creating yet another differentiator vs. the hoard of competitors chomping to get into its space.

As long as the CE industry and Netflix continue helping each other, this love affair will flourish.

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