Firms hope to offer online movie service

SAN FRANCISCO – Home entertainment trendsetters Netflix Inc. and TiVo Inc. hope to link up on a service that will use high-speed Internet connections to pipe DVD-quality movies into the homes of their mutual subscribers.

The recently drooping stocks of both companies perked up Tuesday as investors embraced the prospect of an alliance between two pioneers that have changed the way millions of households rent DVDs and watch television.

Los Gatos-based Netflix has attracted 2.1 million subscribers to its $21.99-per-month service, which mails up to three DVDs at a time after customers place their orders on the Internet. The service, which draws upon Netflix’s library of 25,000 DVD titles, doesn’t charge late rental fees – a concept that has forced video rental giant Blockbuster Entertainment to change its ways.

Alviso-based TiVo makes digital video recorders that let viewers record TV shows onto hard disks, skip commercials and pause live broadcasts. About 1.9 million subscribers pay a $12.95 monthly fee for TiVo’s service, which has inspired a variety of clones.

Neither Netflix nor TiVo would provide details about their possible movie-on-demand service nor even assure that the discussions reported by Newsweek magazine would come to fruition.

“It makes sense to be brainstorming with TiVo right now, but there is no relationship right now or a timeline for creating one,” said Netflix spokeswoman Lynn Brinton.

TiVo spokeswoman Kathryn Kelly issued a similar statement.

The companies already share a common bond – TiVo CEO Michael Ramsay has been on Netflix’s board of directors since May 2002.

But the overlap between the households that subscribe to both Netflix and TiVo is “minimal,” something that makes it unlikely the partnership will be a financial boon for the companies, according to a report issued Tuesday by Friedman, Billings, Ramsey & Co. analyst Alan Bezoza. Netflix and TiVo haven’t publicly disclosed how many subscribers they share.