On yesterday's earnings call, Netflix CEO Reed Hastings said that sometime this quarter, Netflix's streaming service will be coming to a new consumer electronics device. As a result of this forthcoming offering, Netflix said it was raising their guidance for the fourth quarter.

Clearly, whatever device it is, it must have a lot of penetration in the market if Netflix thinks it will have that much of an impact on their earnings so quickly. While it could be  the PS3 or the Wii, if it's a gaming console, my money is on the Wii. To date, Sony has sold about 9M PS3 units in the U.S., while Nintendo has sold more than 25M Wii consoles. When Netflix streaming rolled out on the Xbox 360, 10% of Netflix's members used the service within three month, pushing more than 25M GB of video. Based on those numbers, I don't think the PS3 has a big enough install base to impact Netflix quick enough.

In order for Netflix to get a lot of traction quickly in the remaining two months of this quarter, the service needs to be coming to a device that has a really large reach. What other device in the home has an install base large enough to make it relevant? The Wii, Xbox 360 and PS3, in that order, are the only devices that have a large enough install base in the living room. The only other possible device I can think of would be a set-top-box, through a cable operator, but most of them would see Netflix as competition.

It's also interesting to note that Netflix launched their streaming service on the Xbox 360 almost one year ago, on November 19th. Many have speculated that Microsoft's deal with Netflix includes Microsoft having an exclusive deal for one year, to be the only gaming console to support Netflix streaming. If that is in fact the case, that exclusivity would be ending in 27 days and it would make sense that Netflix would be talking about a new CE device just a few weeks before.

On Netflix's Q3 earnings call, CEO Reed Hastings announced plans to take Netflix's digital offering international, sometime in the second half of 2010. Reed said Netflix plans to roll out a streaming only offering by starting small in one market, proving the model and then expanding into other countries. While such an announcement probably comes as no surprise to anyone and is simply the next evolution for Netflix, the company will have a difficult time generating profit from such a service.

Without any details on how much Netflix plans to charge per month for their streaming only service, you can't figure out their exact costs. But you can come pretty close. Between the prices they pay to the CDNs to stream the videos, which could be a bit more expensive overseas, and the price Netflix has to pay to license the content, users who watch enough movies each month would actually cost Netflix money. With some popular content, licensing and delivery costs can be as high as $0.50 per stream, if not higher. At fifty cents per movie, ten movies streamed by a customer just cost Netflix five bucks.

And how much can Netflix possibly charge for a digital only offering? I don't think they could try and charge more than $5.99 a month, which means Netflix is going to be playing the laws of average when it comes to video consumption. Netflix is going to have to hope that those customers who tax the system and stream a lot of movies each month end up being offset by a larger percentage of customers who only stream a few movies each month. That's a hard business model to forecast when you're trying to guess the consumption rate by consumers, for a brand new service. Clearly, that's one of the main reasons why Netflix is going to start small, in a yet to be announced region and use a lot of that data they collect as guidance for the business.

On the call Netflix said that 42% of their of their subscribers had streamed at least 15 minutes of video in the last quarter. While the number of minutes sounds really low per subscriber and makes it sound like a streaming only service would be profitable, keep in mind they broke out that numbers across nearly half of their subscribers. The real question is what percentage of minutes did the top 10% of their customers make up? My guess is that a much smaller percentage of the overall base of customers makes up the vast majority of minutes watched.

The other interesting part about this announcement is that right now, Netflix does not have the international rights to a lot of the content they stream in the U.S. I don't know what percentage of content is U.S. only, but clearly Netflix is going to have to make a lot of new licensing deals for content relevant to the territories they end up launching in. That alone would keep Netflix from having a large catalog of inventory at launch, which is probably the reason why they won't offer the service for at least another eight months.

It's going to be really fun to watch how this offering does in the market, what region Netflix launches in first and what type of consumption numbers they are willing make public once the service is up and running. This is going to be a great test for a lot of other content owners, like Hulu, who we know are going to launch a subscription based service shortly, and even mentioned today at a conference that it will be sometime next year.

Thanks to AT&T, Brightcove, Episodic, Influxis, Limelight Networks and VideoPublishing.com, we’re throwing the biggest networking mixer we’ve ever had in conjunction with the Streaming Media West show. Come join hundreds of your peers on Tuesday November 17th for free drinks and lots of networking. The mixer immediately follows the closing of the Exhibit Hall on the first night of the show and starts at 7pm in the San Jose Marriott Ballroom.
We’re expecting well over 400 attendees soget your RSVP in now, bring a stack of business cards and you’re in.

A few weeks ago, I got to get hands-on with Comcast’s TV Everywhere service, dubbed “Comcast On Demand,” via a friend that’s in the trial. (I’m not in the Comcast trial personally but am in the Verizon’s TV Everywhere trial and will blog more about Verizon’s trial when I am allowed.) While Comcast continues to make a lot of noise about the service, I think consumers are going to be very disappointed when it rolls out to all 24 million Comcast subscribers by January 1st.

While I know the beta offering I saw is going to change by the time it rolls out in the New Year, the lack of any underlying business model and user limitations won’t be changing. The biggest problem is that these offerings are not truly “TV Everywhere”. You can’t get the content outside your home, when you travel, to any device other than the PC and whatever you stream with Comcast On Demand counts towards your cap.

When Comcast announced their plans, their press release said that the content will be available to any Comcast subscriber on any Internet connection which leaves one to believe that if you are on the road and traveling, you can access the offering online even if you aren’t using Comcast for the connection. But the fact is, that won’t be possible. In a call I had with Comcast a few weeks back, Comcast acknowledged that the service won’t be available to anyone outside of Comcast’s network. So if I can only get this content when I’m at home, where my TV is, why would I watch it on my computer? The value in a TV Everywhere service is the ability to get the content outside of my home, when away from my TV.

Not to mention, full channels by the broadcasters won’t be available and the overall content inventory will be limited. I have spoken to almost half of the 24 content partners in Comcast’s trial about their selection of content and the vast majority of them have said they plan to only make a small fraction of their content available online. Many of them honestly didn’t seem too excited about the service and some mentioned they are in the trial simply to test this whole idea out and collect intelligence on the market.

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Next month, at the Online Video Platform Summit in San Jose, Brightcove's CEO Jeremy Allaire will showcase some of the company's new products and features during his afternoon keynote. While I can't get into too many details, I can say that Brightcove's keynote demo will include distribution strategies that span three screens, live broadcasting and mobile delivery.

Access to Jeremy's keynote on Wednesday, November 18th at 1:45pm is free with an exhibits only pass, but you must sign up online by October 30th. You can also register for the entire 2-days of the summit for only $495, using my personal discount registration code of DRF1, which gives you $200 off the conference pass.

The entire speaker lineup and agenda for the Online Video Platform Summit can be seen here on the website.

Microsoft has given me a few more details surrounding how they are managing to stream 1080p videos on the Xbox 360 with consumers only needing a 4Mbps connection. Microsoft said that Zune Video on Xbox LIVE takes advantage of Microsoft's Smooth Streaming technology, which is a feature of IIS Media Services and that Zune Video was built from the ground-up for the Xbox 360 platform. While the Silverlight plug-in also takes advantage of Smooth Streaming technology, Silverlight is not being used on the Xbox platform.

Microsoft says that Zune video on Xbox LIVE features a state-of-the-art encoder and high performance decoder that allows them to offer instant on 1080p video and 5.1 surround sound with Smooth Streaming playback and smooth fast-forward and rewind functionality. They aren't giving out any details yet on how the videos are encoded and what the settings are, but I expect we'll hear more about that when the service launches to the public. Microsoft also said that they recommend a minimum of 4 Mbps for the full 1080p/5.1 experience but the great thing about the technology is that videos will automatically scale to the best possible resolution based on the speed of the users internet connection.

I can't wait until Microsoft is willing to give out more technical details around the Zune Video technology and how it works. A 1080p video stream, with only a 4Mbps connection, is something this industry has never seen. It really is a big deal.

This morning, I got the Xbox LIVE preview upgrade which gives me the ability to test out some of the new features coming soon to the Xbox console including Twitter, Facebook, Last.fm and 1080p streaming. Of course, the new 1080p streaming functionality is really the one I have been waiting to get hands on with and after watching a bunch of movies this morning, all I can say is that the quality it truly incredible.

After downloading a Zune video app, you can browse through movies available in 1080p and new to the movie service, you can choose to stream or download the movies. If you select streaming, the Zune app does a quick check of your connection to tell you if you can get the 1080p content and once you purchase the movie, the buffer time before it starts is less than a second. When Microsoft says that the new Zune video technology allows for "instant-on" streaming, they aren't kidding. (Updated: Limelight is delivering the streams)

While Microsoft is not yet giving out a lot of details on how the Zune video technology makes all this possible, they have stated that it only takes about 4MB of bandwidth to be able to get 1080p streaming. You really have to see it to believe it as it really is that good.

Next month, on Wednesday Nov. 19th, Marc Whitten, GM of the Xbox LIVE service will be the keynote presenter at the Streaming Media West show. Marc will be showing off the 1080p streaming technology as well as some other upcoming Xbox LIVE features and will be taking questions from the audience. We'll also have some cool surprises in store for the audience as well, so sign up now to get access to Marc's presentation. It's free to attend with an exhibits only pass if you sign up online before October 30th.