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Great performance is paired with excellent internet services including BBC iPlayer. At this price, you can’t ask for more.

Anyone who bought a first-generation Blu-ray player last year should probably look away now. Sony’s third-generation BDP-S370 is the cheapest of three new models (the other two being the S470 and S570) and, despite costing just £134, has the performance and features we only dreamed of 12 months ago.

It may be physically smaller, but this is no cut-down, half-baked player. For a start, you get Bravia Internet Video (BIV), which is a comprehensive on-demand video service – the same as included in Sony’s 2010 Bravia TV range. This means you can have BBC iPlayer (including HD), Demand Five, YouTube and LoveFilm on your TV – great news if you’ve only just bought an HD TV and don’t want to replace it. BIV also includes EuroSport clips, DailyMotion, blip.tv plus content from various other providers. Existing LoveFilm subscribers with unlimited disc subscriptions are onto a winner, as they will get free access to thousands of on-demand films.

These services in themselves are almost enough to justify the £134 price, but there’s much more than that. The S370 has a handy front USB port which means you can attach a flash drive or hard disk and play back a wide range of media. For example, you can browse to a folder and play a photo slide show, or choose a different folder and listen to all the MP3s within.

However, the most useful support is for video. We were able to play MKV and DivX HD files with no problems – there was no delay in loading them and none of the flaky performance we’ve seen from other devices when rewinding or fast forwarding. There’s also support for AVCHD, WMV, MPEG 1, 2 and 4, plus VOB. Virtually all formats can also be played from disc, while a subset can also be streamed across your local network from a DLNA server (the DLNA client will be added in an imminent firmware update).

Sony has also reintroduced Super Audio CD support (which will please a few people) but far more will appreciate the improved the boot and loading times for discs. In normal standby mode, the S370 will turn on and eject the tray in around 3 seconds. It then took 18 seconds to begin playing our Casino Royale Blu-ray disc. This is a massive improvement on previous models.

Unsurprisingly, there’s no built-in storage for BD Live content, but a rear USB port can be used for permanently attaching a flash drive for this purpose. There are no analogue audio outputs either; but the S470 and S570 also lack these. The absence of WiFi is perfectly reasonable at this price, but the optional UWA-BR100 802.11n USB dongle costs an outrageous £70. It’s also important to bear in mind that this is the only model in the new range that doesn’t support 3D Blu-ray movies. What you do get are HDMI, component, composite, coaxial and optical S/PDIF outputs.

When watching our test Blu-ray movies, picture and sound quality was as good as we’d expect. However, as we’ve said previously, there’s nothing much a player can do to improve quality here. When upscaling DVDs, the S370 did an excellent job of sharpening up the image and reducing artefacts. We also like the way you can zoom in and out of digital video files, allowing you to show them at their native resolution if you don’t mind black bars round the edges. The player did a reasonable job of upscaling these, but there’s a limit to how much low-quality files can be improved.

If you own an iPhone or iPod touch, you can download the free BD Remote app which lets you control the player using your device’s screen. This is a bit of a gimmick as the real remote control is well designed.