Netflix rolls out VOD rental plan

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Netflix is set to begin today a months-long rollout of an Internet movies-on-demand service that will make it a more direct competitor with the likes of Movielink and CinemaNow, two early services that rent films for viewing on computer screens.

Netflix said its Watch Now service launches with 1,000 movie and TV titles, about the same number it had when it debuted its DVD-by-mail subscription model in 1999. That service now features 70,000 titles.

The company is offering Watch Now programming to its subscribers for no additional fee, though hours are limited depending upon the subscription option. The most common, whereby users pay $17.99 per month and are allowed three DVDs at once, will allow 18 hours of online movie-watching each month.

The movies are considered rentals, and Netflix has no plans to sell movies via Internet download, as Apple Inc. does through its iTunes service, Netflix chief content officer Ted Sarandos said.

"This is the emergence of a brand new model," he said, vowing to keep the rental process simple. "No Internet companies failed by over-specializing, but they have by over-diversifying."

Several minor and most major studios will provide content, save for Disney, with which Netflix is negotiating, Sarandos said.

Universal, for example, is initially offering about 350 titles to Netflix for its Watch Now initiative, said Frances Manfredi, senior vp and general sales manager for NBC Universal TV distribution.

"We know consumers want to watch content in a variety of ways," she said, though she added that "the hard-goods business is dominant, and it will be for some time to come."

Some of the content from NBC Universal includes 3,500 hours of mostly classic TV episodes and some newer fare as well, like "The Office." Film titles include "The Motorcycle Diaries," "The Constant Gardener" and "Twelve Monkeys."

To use the service, subscribers must download a browser applet, about a one-minute process, Sarandos said. Then, after clicking a title to watch, the movie begins playing in about 15 seconds, negating lengthy download times. Picture and sound quality vary depending on the Internet connection, reaching DVD quality at a 3MB-per-second connection. Users have pause, rewind and fast-forward functionality.

Netflix has been developing the service for about two years. It spent $5 million-$10 million last year and will spend up to $40 million this year as it rolls it out during a six-month period.

The company's goal is to deliver content to TV screens on demand, but executives say it will be a slow transition. It once had been working with TiVo on just such a solution, but Sarandos said that partnership is "not currently active."

"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," Netflix CEO Reed Hastings said.

"Over the coming years we'll expand our selection of films and we'll work to get to every Internet-connected screen, from cell phones to PCs to plasma screens. The PC screen is the best Internet-connected screen today, so we are starting there."
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