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1/16/2007
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Netflix Debuts PC Video Streaming Service

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.

The Netflix DVD-by-mail service said today it will begin delivering entertainment over the Internet. The company said that it has made streamed films and TV shows available to a random subset of its customers and that over the next six months it plans to extend the service to all its subscribers.

"We named our company Netflix in 1998 because we believed Internet-based movie rental represented the future, first as a means of improving service and selection, and then as a means of movie delivery," said Reed Hastings, the company's CEO, in a statement. "While mainstream consumer adoption of online movie watching will take a number of years due to content and technology hurdles, the time is right for Netflix to take the first step."

For Cynthia Brumfield, president of media research consultancy Emerging Media Dynamics, Inc., the time is rather late, with Netflix having been beating to the punch by the likes of Apple, Amazon, CinemaNow, Movielink, and Wal-Mart, to name a few. Just today, the founders of Skype re-branded their new peer-to-peer "piracy-proof" streaming video platform, currently in beta testing, Joost.

"Netflix is really just now entering the film-over-the-Internet distribution business and there are so many others that have come before Netflix and in many respects are farther along," said Brumfield. "But it's good news for Netflix because finally they're on the Internet. I mean their name is Netflix and one would think they'd be an Internet distribution company. But of course until today they've been strictly in the physical DVD realm."

The DVD realm is not a bad place to be. It is after all where the money is. Despite a report last October from Emerging Media Dynamics that estimated that the sales and rental of movies over the Internet would "skyrocket" to deliver nearly 60 million in unit sales and over a half a billion dollars in revenue by 2010, such numbers represent only 2% of home video rental and sales revenue for the motion picture industry in 2005.

"It's going to be a big business but it's still going to be very small in comparison to the DVD business and very small in comparison to the worldwide theatrical distribution business," said Brumfield, noting that half a billion dollars is the equivalent of one or two Hollywood blockbusters.

And at the moment, Apple owns most of this emerging market. In 2007, Apple's iTunes will account for 76% of the Internet film download market, according to Brumfield. "Apple accounts for the lion's share of people buying full length theatrical films on the Internet," she explained. "Over time, we're projecting their sales will decline proportionately as some of these other sites gain steam."

At last week's Macworld Conference in San Francisco, Apple CEO Steve Jobs said that Apple had sold 50 million TV shows and 1.3 million feature-length films since it launched its video-capable iPod in October, 2005.

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