Thinking Inside the TiVo Box

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In a move that should create waves in the digital downloading space, Amazon.com (Nasdaq: AMZN) and TiVo (Nasdaq: TIVO) are teaming up to deliver digital flicks via the Internet directly into TiVo DVR boxes.

It could be the final step in completing the convergence of celluloid and broadband connectivity. Consumers would still need to purchase their films online through Amazon's nascent Unbox service, but the convenience of being able to store -- and watch -- the films through their TV-connected TiVo boxes is huge.

True, some folks have their media center computers hooked up to televisions already. Apple's (NYSE: AAPL) Apple TV device is also looking to bridge the gap. Still, with more than a million homes already set up with a broadband-enabled TiVo, it will make Amazon that much more able to stand out in the crowd.

Digital video has become a competitive market. Apple has been selling video downloads through its iTunes store since last year. Netflix (Nasdaq: NFLX) is already streaming films for free to its subscribers' PCs. Blockbuster (NYSE: BBI) has hinted at going through a set-top box to deliver living room rentals. This new alliance would beat them all.

The large installed base of TiVo users are already open to paying a premium for televised entertainment. They have the disposable income to pay for TiVo's monthly service. If anything, the only limitation is the relatively small size of the TiVo hard drives on entry-level machines. That will get in the way of any heavy-duty digital purchases, though it should be just fine for digital rentals.

How quickly can Amazon and TiVo launch the new service? Will it work seamlessly and glitch-free? We'll have to wait for those answers. The one thing we do know is that the bar has been raised in digital flick delivery. And that, folks, is the feature presentation.

Amazon.com, TiVo, and Netflix have been recommended to Stock Advisor subscribers. Find out why with a free 30-day trial subscription today.

Longtime Fool contributor Rick Munarriz owns shares in both TiVo and Netflix. He also is an early adopter of both services. He is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.