Undoubtedly not wanting to get left in the dust after Apple’s iTunes Movie Rental announcement in a couple of weeks at MacWorld, Netflix has announced they are teaming up with LG to bring streaming movies to the living room. While presumably a dedicated device will be made, Netflix mentions the possibility of including this service as a feature of components such as DVD player, cable boxes, and video game systems in the future.

As I said last week:

You need to have 3 things to succeed here (in digital distribution):

1) The right price for the right content
2) A way to get to the living room
3) A user-friendly system

While Netflix has #1 partially covered (their streaming is free for members of the service, but I say ‘partially’ because it only has select titles) they seemingly had a deal to cover #2 by putting their movies on TiVo boxes in the living room back in 2005, but let it fall apart. Why its taken them over 2 years to resurrect this idea is anyone’s guess. #3 they are not doing a very good job at.

So here is #2 – and while this is exactly what Netflix needs to do, they are also clearly running late for the party as no living-room-ready device for this service will be available until the second half of 2008 at the earliest. This is also the 2nd announcement they’ve made since word of iTunes Movie Rentals was leaked – seeming to indicate that they are pretty scared of Apple entering their world. One can’t help but wonder if this was a last-second plan thrown together just to appease customers and shareholders hoping they don’t jump to Apple – after all, Netflix had hired the founder of ReplayTV to develop their own in-house set-top box, but that’s apparently out of the picture now.

Seeing as Microsoft is already in the living room for movie rentals via the Xbox 360 and Amazon’s Unbox is already there as well via TiVo, Netflix could find the living room a very crowded place by the time it enters later this year. If Apple is able to move a lot of Apple TVs by then, this new LG box could be a non-starter. Still, it’s a lot better than Blockbuster is doing – which appears to be nothing.