Netflix on Wii Won't Challenge Microsoft, Sony

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Netflix Wii

As expected, the Nintendo Wii will shortly become the third current-generation video game console to pipe Netflix videos to millions of potential US homes. The service, which requires a special no-cost disc to access Netflix's videos, will allow Wii owners with basic Netflix subscriptions ($9 a month) or higher to instantly watch thousands of movies and TV episodes at whim. What's more, unlike Microsoft Xbox LIVE subscribers who pay $50 a year for the same privilege, access through Nintendo's console won't cost a thing--it's free to anyone with a Wii and a broadband link.

Sound like a deal? It should be, given Nintendo's massive 26 million install base in the US (roughly a third more than Microsoft's Xbox 360). And it would be, save for one niggling quandary:

The Wii can't do high-def.

Nintendo's little-console-that-could, for all its game-related kudos, is strictly locked at 480p, the high-end spec for standard-definition TVs (sometimes called EDTV or "enhanced definition"). That amounts to just 640 by 480 (or 720 x 480, wide) lines of resolution in NTSC-based countries like the US. Microsoft's Xbox 360 and Sony's PlayStation, by comparison, run at 720p or 1080p, i.e. 1280 by 720 and 1920 x 1080 lines of resolution, respectively.

Ever watched a DVD video piped through a high-def 1080p television's S-video or Component connections? It's not pretty. A high-definition LCD TV runs natively at 1920 x 1080. It can display older SDTV feeds, but it has to interpolate or "stretch" the pixels. The result? Washed out, blurry imagery. In fact the video tends to look worse than it would run through an old-school tube-based TV.

What that means: If you're a Wii owner and movie/tv buff currently running a standard-def TV, and if you don't care about the visual quality of TV shows and movies run through your HDTV, and if an Xbox 360's just not in your budget, this deal may be for you.

But if you're an Xbox 360 or PS3 owner, or you care about getting top performance from that high-def TV you just got for Christmas, you probably won't be interested. The Xbox 360 version of Netflix offers superior visual fidelity, no two ways about it, not to mention all the LIVE-based perks like party-viewing and the option to upgrade your Netflix queue natively. That knocks Xbox 360 owners off the potential customer demographic (notwithstanding parents who might want to give their Wii-playing kids access in another room). The PS3 version...well, there's not an inbuilt PS3 version yet, probably due to Microsoft's Netflix "exclusive" which as far as anyone knows runs through 2010, but you can already more or less do the deal using an officially supported workaround. That, and PS3 owners tend to be even pickier about visual quality given the PS3's HDMI-based Blu-ray 1080p capabilities.

I'd call that two strikes to the tune of roughly 30 million Xbox 360 and PS3 owners combined.

Wedbush Morgan's Michael Pachter is slightly more bullish, noting he believes the deal could drive new subscriber growth (to Netflix) of over one million customers a year. However, he's not convinced that adding Netflix to the Wii will be the driving force it's been on the Xbox 360 (or expected to be for the PS3). Pachter attributes this to "likely fewer than 20%" of Wii owners being connected to the Internet. By contrast, he believes "more than 75%" of Xbox 360s and "80% of PS3s" are connected online.

Translation: Win-win for Netflix, since the deal only adds subscribers to its roughly 11 million US stable, but not the silver bullet it might have been, had Nintendo managed to introduce a high-definition part beforehand.

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