SEATTLE – Amazon.com Inc. (AMZN) and TiVo Inc. (TIVO) have jumped into the digital download wars — with a twist.
The new partners will beam movies and TV shows directly to their customers' living rooms.
The companies said a test version of their new service, called Amazon Unbox on TiVo, will begin Wednesday with an unspecified number of TiVo customers.
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The full service is expected to debut later this year, available for the 1.5 million TiVo digital video recorders with broadband Internet capability. Officials refused to give a target date for the service's launch.
Thousands of movies from several major studios and TV shows from CBS (CBS) and Fox will be available, said Bill Carr, Amazon.com's vice president of digital media. Both companies expect agreements with more studios and networks in the future.
"We think this is a breakthrough," Carr said. "We're providing people with the simplest way to actually play back their digital content on a television set."
Unbox on TiVo joins a rash of new digital download services from retailers and entertainment companies, and builds on the Unbox service that Amazon.com launched last year.
Wal-Mart Stores Inc. (WMT) entered the market Tuesday, when it unveiled an online movie download store. Other competitors include Movielink, which is owned by five studios, and CinemaNow.
Most online download services, however, leave content essentially trapped on the customer's computer. TiVo and Amazon.com's major advantage is their ability to deliver movies and TV shows directly to the TiVo box, observers said.
"Frankly, nobody else has the solution that allows you get something over an Internet connection and watch it with the click of the button," said James McQuivey, principal analyst at Forrester Research Inc. (FORR) "If it's that easy, then they'll be the first. They'll be able to plant their flag."
Apple TV, the new set-top, video-streaming box coming this month from Apple Inc. (AAPL), should be a top rival. Like Unbox on TiVo, Apple TV is designed to move digital content from a user's computer to his TV set.
But Unbox on TiVo may have an advantage in the customers who already have broadband-ready TiVo hardware in their homes.
While a new Apple TV box will cost around $300, the only additional cost for a TiVo user will be the price of a movie or TV show over the existing Unbox download service.
TV episodes will sell for $1.99, with most movies priced between $9.99 and $14.99, the companies said. Movie rentals will start at $1.99. No extra hardware purchases are required, and there will be no additional subscription fees, the companies said.
Although the technology has yet to catch on broadly with consumers, Internet downloading is expected to generate about $4 billion in annual sales in five years, compared with an estimated $27 billion from DVD rentals and sales, according to Adams Media Research.
TiVo and Amazon.com are betting that their ability to integrate downloads with the existing choices on a TiVo video recorder will give them a distinct advantage in grabbing a share of the market.
"I suspect we will see a parade of similar kinds of devices over the next several years," said Larry Gerbrandt, general manager of Nielsen Analytics.
Shoppers who want to downloaded a video program through the new service will place the orders through the existing Unbox video download service, company officials said.
Videos may be sent to a TiVo box or a computer and can also be used on portable devices. Videos also don't have to be stored permanently on a customer's hard drive — they can be downloaded again from Unbox after being purchased.
Initially, the companies will offer videos from CBS, Fox, Lionsgate (LGF), Paramount Pictures, Universal Studios Home Entertainment and Warner Bros.
Unbox videos presently come with copyright protection based on Microsoft Corp.'s (MSFT) Windows operating system. Those sold through the TiVo service will use a different technology to allow them to play on the TiVo's Linux-based system, officials said.
TiVo had previously announced a downloading partnership with Netflix (NFLX), the mail-order movie rental service, but that deal eventually fell apart.
TiVo Chief Executive Tom Rogers said TiVo decided to go with Amazon.com in its new venture because the online retailer had a large customer network and a large catalog of distribution rights, which Netflix couldn't deliver.