Netflix Throws Microsoft Another Bone

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Having Netflix (Nasdaq: NFLX  ) CEO Reed Hastings on its board of directors may be Microsoft's (Nasdaq: MSFT  ) savviest move yet.

First we had Netflix rolling out its online streaming service to Windows-powered desktops and laptops, several quarters before Apple (Nasdaq: AAPL  ) owners got in on the perk.

Then it was the DVD rental giant streaming through Microsoft's Xbox 360 consoles, roughly a year before PS3 and Wii owners could do the same.

Now Netflix is showing some love to Microsoft's fledgling mobile business, showing off a prototype of the first official Netflix app for Windows Phone 7 Series smartphones -- and, yes, it will allow subscribers on unlimited plans to stream flicks at no additional cost.

This really isn't a surprise given the chummy relationship between Microsoft and Netflix. The only real shocker is that Netflix was downplaying the importance of a smartphone application at all just two months ago.

"It is not a huge priority for us because we are so focused on the larger screen," he told analysts during the company's quarterly conference call in January, when asked about supporting Apple's iPad and iPhone.

Is it right? It made perfect sense for Netflix to stream for PC owners first given that Microsoft remains the operating system of choice for personal computing. However, Wii was routinely the top monthly seller when the Xbox 360 deal was announced and the PS3 is a logical couch potato appliance since it's the only one that plays Blu-ray discs out of the box.

The mobile push is a bigger stretch, since Apple and Research In Motion (Nasdaq: RIMM  ) are the stateside juggernauts of the smartphone space. It's also hard to neglect Palm's (Nasdaq: PALM  ) multitasking charm and the rising popularity of Google's (Nasdaq: GOOG  ) Android platform.

The outcry may get even louder when the iPad -- a device that is a better fit for online streaming than smallish smartphones -- hits the market next month.

Microsoft really owes Netflix in general and Hastings in particular for making Mr. Softy's products more relevant with early adopters than they probably deserve to be. Here's a suggestion: If Microsoft ever rolls out an e-book device, call it the e-Reeder.

Is Netflix right to be showing off its Microsoft app before other smartphone programs? Share your thoughts in the comment box below?

Microsoft is a Motley Fool Inside Value pick. Google is a Motley Fool Rule Breakers selection. Apple and Netflix are Motley Fool Stock Advisor recommendations. Motley Fool Options has recommended a diagonal call position on Microsoft. Try any of our Foolish newsletter services, free for 30 days.

Longtime Fool contributor Rick Munarriz has been a Netflix shareholder -- and subscriber -- since 2002. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 16, 2010, at 6:27 PM, LDSGJA wrote:

    I'm really glad, cause frankly, that was a big dissapointment that they were ignoring the mobile phone market. The iPhone app is where the money is at.

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