According to a pre-CES press release, Netflix is working with electronics giant LG to produce a set-top box capable of receiving rented movies over the internet. Console support for the company’s direct download service may not be far behind.

Netflix already allows subscribers to stream a selection of films to their computer screens at no extra cost. The new product would work under the same principal, except that rentals can now be watched on that old standby of the living room entertainment center — the TV. That, of course, means that a wider group of consumers would actually take advantage of the company’s video-on-demand.

The partnership with LG also means that the new unit may play both next-generation disc formats (HD-DVD and Blu-ray) in addition to streaming films.

That doesn’t necessarily imply neutrality in the war, though, as Netflix’s CEO Reed Hastings has expressed interest in getting all “buddy-buddy” with other manufacturers, console-makers included. Considering that Microsoft already has the beginnings of a rental service in place on the Xbox Live Marketplace, and Sony’s had trouble getting any kind of real media distribution off the ground, the latter would seem to be a more beneficial choice.

On the other hand, Hastings is a member of Microsoft’s board and their extensive library of titles could further bolster the existing offerings. With rumors of Bill Gates making a big Xbox-related announcement at CES, we can’t help but wonder if this is in any way related.

That’s not to mention Sony’s preference for doing things “their own way” when it comes to format and distribution.

Lacking a storage device to help cache large video files, Nintendo’s Wii is likely out of the question (though Netflix’s streaming leaves no permanent copy of a film on a user’s hard drive).

We can’t do a whole lot more beyond speculating about console tie-ins at this point, but the LG device itself is set to debut in the second half of 2008.

Tags: Film and TV, films, lg, Microsoft, Netflix, Playstation, rentals, set-top-box, Sony, Xbox-Live

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