By Sue Zeidler

LOS ANGELES (Reuters) - DVD rental company Netflix Inc on Wednesday said it was developing a set-top box with LG Electronics Inc to let subscribers watch movies streamed directly from the Web to their TVs.

Netflix, with about 7 million subscribers, has for quite some time said it was looking to extend its Internet movie delivery feature -- which lets subscribers play back about 6,000 films and TV episodes on PCs -- to the television.

The leader of online DVD rentals will be entering an increasingly crowded and confusing market when it rolls out the new device via an LG-networked player sometime in the second half of 2008.

Like Netflix's PC instant viewing feature, the online TV streaming feature would be included in all of its various price plans, generally ranging from $4.99 to about $16.99 a month, at no extra charges. About 90,000 titles are available through the Netflix online mail order service.

Pricing and other specific details of the LG product were not available, but a person with knowledge of the situation said LG would likely embed the receiver into its $799 dual-DVD player, which supports the competing Blu-ray and HD-DVD high-definition DVD formats.

The promise of increased Web video viewing has lured many companies into the sector, including Vudu Inc, which offers a set-top box for $399 that lets consumers buy or rent movies from a selection of about 5,000 titles.

Apple Inc now offers Apple TV, which has failed to gain significant traction, while TiVo is also letting users download TV shows and movies through a partnership with Amazon.com Inc . Wal-Mart Stores Inc late last month canceled its online video download service that enabled purchased videos to be played on PCs.

Various other video download services have also struggled, including CinemaNow and Vongo.

"Internet to the TV is a huge opportunity," said Netflix Chief Executive Reed Hastings. "We believe streaming is the way to go," he added.

Hastings said the LG partnership was the first of many such deals for Netflix. "We'd like to see a hundred Netflix-capable boxes," he said, noting he also was exploring partnerships with makers of Internet-connected game consoles, cable and satellite companies.

Another prominent name in the sector is Movielink, which was backed by several Hollywood studios for five years before eventually being sold last month to Netflix's key rival, U.S. movie rental chain Blockbuster Inc .

Separately, LG also confirmed that this Sunday it was planning to unveil a wireless set-top box, which would let consumers place the box away from their TVs, and reduce clutter.

(Reporting by Sue Zeidler; editing by Carol Bishopric)
© Copyright 2007 Reuters.

Photo:
Reed Hastings, CEO of Netflix Inc., a online DVD-rental service, holds several DVD's as he poses at the Netflix offices in Beverly Hills, California December 8, 2005. Netflix Inc on Wednesday said it was developing a set-top box with LG Electronics Inc to let subscribers watch movies streamed directly from the Web to their TVs. REUTERS/Fred Prouser