The DVD-by-mail company is testing the service on a random subset of its customers, and plans to roll it out to all customers over the next six months.
Apple's dominance may be one reason that Netflix is careful to point out that it is in the movie rental market rather than the digital download market.
"We see Netflix as well placed to play in the movie rental market," said Neil Hunt, chief product officer for Netflix. "If you look at the other competitors out there, there are strong players in the download-to-own market. That compares with yesterday's world where people purchased DVDs for $20 or thereabouts. We see a rental segment where they come to Netflix and rent them for $2 or $3 dollars. And we see an ad-supported segment where you get the thing delivered for no fee, but with ads stitched in the middle."
Netflix subscribers with Windows computers will be able to access to the new service at no additional cost. Their subscription plans will determine the number of hours of free online viewing available to them.
"What we've delivered today changes the business model from the traditional pay-per-view, where you have to make selection and pay a $4 fee to watch the movie," said Hunt. "The model that we're proposing is it's included with your subscription. With an $18 subscription you'd get 18 hours of movie viewing and you can spend that 18 hours to watch a few minutes of this or a few minutes of that, or you can watch a few movies all the way through."
Netflix initially will be offering subscribers 1,000 titles from its 70,000 title library for viewing through an Internet-connected PC. That's four times as many as the number of movie titles Apple currently offers through iTunes. Eventually, the company expects to add more titles and to support to the Mac operating system and other platforms.
"We want to get to all Internet-connected screens, all the way from connected cell phones to the plasma TV in your living room," said Hunt. "The PC is just the first step on the way."
It may also be a dead-end. Cable and telephone companies are racing to roll out high-speed IPTV service with pay-per-view service around the U.S. If they can manage to deliver a user-friendly service at a reasonable price -- quite a challenge for an industry insulated from the sort of customer-centric focus that has arisen among hyper-competitive Internet companies -- they may find there's a receptive audience among those who'd rather avoid the difficulties of moving content from computers to televisions.
But since Netflix isn't trying to build a bridge between computers and TVs, as Apple is with its new Apple TV media hub, its new service clearly adds value for its subscribers. And it's hard to argue with that.
The Business of Going DigitalDigital business isn't about changing code; it's about changing what legacy sales, distribution, customer service, and product groups do in the new digital age. It's about bringing big data analytics, mobile, social, marketing automation, cloud computing, and the app economy together to launch new products and services. We're seeing new titles in this digital revolution, new responsibilities, new business models, and major shifts in technology spending.