Netflix brings service online

Films, TV shows can be viewed instantly

The company that turned mail-order DVD rentals into a phenomenon is hoping to do the same for movies on the Web.

Netflix has pacted with a number of studios to offer streamed movies to its subscribers in a bid to both test and usher in an era of PC-viewable films.

Under the program, Netflix is allowing customers to order movies and stream them on their PCs. Customers will not own the films and will not be able to burn them to a disc or view them on other devices.

The digital-delivery service won’t cost anything for subs, who will be allotted monthly viewing time according to their particular plan. Those subscribing to the $17.99 monthly plan, for instance, will be given 18 hours of viewing time.

Program, which will be rolled out over the next six months, also allows for customers to watch portions of a movie.

“Our long-term goal is to deliver movies to every Internet-connected screen in America and internationally,” Netflix chief content officer Ted Sarandos said.

Netflix will promote the service and titles as part of the recommendations it traditionally makes to customers for physical DVDs.

Company touts technology that will essentially allow subscribers to watch movies in real time. Movies will take only about 10 or 15 seconds to begin playing, execs said, while they expect streams to have few of the hiccups that can accompany other long-form streaming.

But Netflix is launching with a relatively small library of 1,000 titles (its physical warehouse contains more than 70,000), with the hope of ramping up to 5,000 by the end of the year.

Among the studios that have made movies available are Par, Warners, MGM, New Line and Lionsgate; Disney is among the few notable holdouts.

A number of television nets, such as NBC Universal and BBC Worldwide, also are offering programming.

Netflix declined to specify the titles that would be made available at launch.

Studios have been nervous about making available content under a download-to-own model, fearing it could cut into the lucrative physical DVD business.

Netflix offered a slightly different proposition: Take the rental business studios were already comfortable with, but shape it for a new medium.

On the other hand, where download-to-own services like Movielink offer studios the tantalizing prospect of revenue on $20 transactions, Netflix’s decision to give away these movies means a smaller revenue pie for everyone. (Movielink and other services also have a nascent rental service.)

Instead, it’s believed Netflix will share subscriber revenue with the studios, an amount possibly determined by the amount of times a film is streamed.

Deal essentially wades into new intellectual-property ground somewhere between digital delivery, standard DVD rental and subscription viewing, combining elements of all three.

For example, because Netflix is a subscription service in the manner of pay TV nets, streamed content could butt up against pay TV exclusivity. Much of the early content will therefore be either catalog titles already beyond the pay window or specialty fare such as docus and foreign films, which often aren’t part of an output deal.

The addition of streamed movies brings to fruition years of speculation and thwarted effort for Netflix in the digital-delivery category.

Discussions with TiVo over a joint service fell through, and the company has mostly demurred when analysts have inquired about its digital delivery plans.

Move is also an attempt by the company to regain traction against its main competitor, Blockbuster. After years of unmitigated Netflix victories over the homevid chain, Blockbuster has been on a bit of a rebound of late.

In the fall, Blockbuster announced its Total Access program, which allows customers to mix online and store rentals and reduces the waiting time for customers to order their next movie.

With this program, Netflix hopes to cut down on subscriber time even further, basically turning its Web site into an on-demand movie service.

But whether it will catch on, given the limitations of the device and the library, remains a big question for the company.

It also remains to be seen whether a company that owes its popularity to its convenience factor can translate the same ease-of-use to a platform that’s often perceived as inconvenient.

Apart from luring new subscribers, streaming program offers some other financial benefits to the company.

Because it’s far more expensive to ship a DVD by mail than to stream it, company would save substantial amounts of money if it shifted its business from physical to digital delivery.

But execs caution that those days are far off.

“This is a relatively small business compared to watching DVDs on your television,” Sarandos said. “This is the first step in a very long evolution in the consumption of entertainment.”