In an effort to offset threats to its DVD-by-mail service, Netflix will begin sending movies and TV shows directly to subscribers' PCs -- for free. The images will be transmitted as streaming video. Netflix plans to roll out "Watch Now" to about 250,000 subscribers per week through June. The new offering only works on computers equipped with high-speed Internet connections and Microsoft's Windows OS, so it can't be used on cell phones, TVs, video iPods, or Apple computers. Still, it will give Netflix a strategic advantage over Blockbuster, which also offers an online DVD rental service. Though Netflix had enough muscle to elbow behemoth Wal-Mart out of the space in 2005 and is forecast to have made about $44 million last year, its stock price has plummeted over 40% over the past three years on fears the company will be unable to avoid built-in obsolescence. Watch Now will compete with Apple's iTunes, Amazon's Unbox, MovieLink, CinemaNow, and V-o-D services from cable companies -- none of which offer the service for free.
• Sources: Netflix press release, New York Times, LA Times, Newsday, MoneyCentral
• Related commentary: Netflix Announces New Video Streaming Service, Blockbuster Gaining Over Netflix?, Blockbuster Soars, Netflix Running Out of Steam, Blockbuster vs. Netflix: Playing the Online DVD Rental Market, Netflix Faces These Six Challenges. Conference call transcripts: Q3 2006 (Oct 23rd, 2006)
• Potentially impacted stocks: Netflix, Inc. (NFLX). Competitors: Apple, Inc. (AAPL), Amazon.com Inc. (AMZN), Blockbuster Inc. (BBI), Hastings Entertainment Inc. (HAST), Movie Gallery Inc. (MOVI).
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