One Step Closer to Entertainment Nirvana

Your old TV may be the slickest flat screen plasma or LCD set in the neighborhood, but it's still nothing more than a passive idiot box that relies on the cable connection or an assortment of set-top boxes to feed it some content. It's no fun watching an empty black screen, right?

Well, that will change in the very near future. The next telly you buy will be better than the old one in several important ways. It'll be slicker, sweeter, and perfectly capable of serving up its own shows and movies whenever you need it. The idiot box took some evening classes and is quickly becoming a genius. And you can get rich watching the sea change.

Watch whatever you want, whenever you want it
You already know everything about TiVo (Nasdaq: TIVO  ) boxes and digital cable with video-on-demand features. But you still need another ugly box in your entertainment center to take advantage of these handy video streams. Not for much longer, though.

Sony (NYSE: SNE  ) is already selling LCD TVs that can stream videos from content sources like Google's (Nasdaq: GOOG  ) YouTube, the CBS (Nasdaq: CBS  ) network, and Amazon (Nasdaq: AMZN  ) Video On Demand. Actually, you still need to buy a $300 adapter for these sets that connects to the Internet to pull down all these fancy tidbits. But at least it's tacked on behind the TV -- out of sight, out of mind.

And today, LG Electronics takes the stage at the 2009 CES electronics show to present a line of LED-lit LCD televisions that connect to the 'Net without clunky extras. These TVs will stream full-length movies from the Netflix (Nasdaq: NFLX  ) Watch It Now library, as well as video files kept elsewhere on your home network. Plug the set into the network with an Ethernet cable -- "No wireless on the new LG TVs," Netflix spokesman Steve Swasey tells me -- and you're good to go. Sure, the new LG sets still cost $200 to $300 more than an Internet-less version, but it's easier on the eyes and on the non-technical mind than Sony's solution.

One step closer to paradise
Every intermediary taken out of the Internet-to-TV process makes the whole concept a bit more manageable and plausible. It's one less installation step that can be bungled; one less ugly bundle of cables behind your TV; one less piece of hardware that can break or overheat. The Holy Grail of entertainment centers is the TV set that you simply buy, take home, and start up -- and you're greeted with a full set of cable stations and on-demand clips without ever touching a set-top box.

When CES 2015 rolls around, I expect that to be the standard in new television sets. The imminent switch to all-digital TV broadcasts paves the way to a more advanced TV platform, and all we should really need to stick into a future TV is a power cord and a properly provisioned tru2way cable card or its antecedents. The card connects to and decodes whatever video streams your cable or satellite provider is sending out, a WiFi chip elsewhere in the set should do the same for transparent Internet connectivity, and the set itself will handle all the mixing, switching, and processing it takes to paint your screen in the colors of YouTube, Hollywood, and your digital video camera.

It'll be easy to set up, control, and organize this setup, and you can reclaim those precious cabinet shelves from the tyranny of set-tops. Finally, your collection of Van Halen memorabilia or American Girl accessories gets its true place in the sun, right in the living room.

How to invest in all of this
Okay, so the future of home entertainment looks rosy and lush. The problem for investors is that most of the companies that will benefit from the changes will cannibalize themselves and each other in the process -- Sony, LG, and Samsung are leading the charge but also sell lots of the old-line stuff.

Comcast (Nasdaq: CMCSA  ) and its service provider rivals sure profit from digital upgrades. But the bulk of those service bumps will probably fall in 2008 or 2009, and may already be baked into their stock prices. Besides, the cable giants are already too big to be terribly exciting. Buy this if you believe in the digital revolution but don't want to commit your portfolio to risky small-caps.

But if you're a growth stock junkie like me, the in-betweens are your best bet. TiVo wants to get out of selling expensive little boxes, and its proven software could run directly on your next LCD or OLED set. Amazon's On Demand service looks ready for prime time, and that company is ready for a new era in many other ways.

My personal pick is Netflix, though. Unlike many of its rivals, Netflix does nothing but movie delivery. Even in its early iterations today, the streaming video service is a compelling value to consumers with a surprisingly polished user interface for such a young little thing. As the DVD era fades to black, Netflix is uniquely positioned to become a leader under the all-digital paradigm, and the company is working hard to make its presence known through multiple channels.

The future is coming -- fast. Blink and you'll miss the profits.

Further Foolishness:

Google is a Motley Fool Rule Breakers selection. Netflix and Amazon.com are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Anders Bylund owns shares in Netflix and Google, but he holds no other position in any of the companies discussed here. Growth stock junkie, indeed. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.


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