Netflix: iTunes complements new streaming service

Earlier this week mail order movie rental service Netflix introduced a new service that enables computer users to stream movies directly to their desktops. The company said it’s a complementary service to Apple’s iTunes Store, not a competitor.

“You used to purchase video content by watching ad-supported content on TV, then you’d go down to the store and buy a video or rent it. That model has been adopted to digital distribution,” explained Steve Swayse, Netflix’s director of corporate communication.

“Services like YouTube and Google Video fill that ad-supported content role now,” he told Macworld . “Apple and are offering a ‘download to own’ model that’s not unlike buying a video from the store. And Netflix is bringing instant online viewing to the movie rental business.”

Complementary or competition?

While Netflix sees the iTunes Store as a complementary service, Inside Digital Media senior analyst Phil Leigh thinks it’s only a matter of time before Apple becomes a direct competitor.

“It makes all the sense in the world for that type of consumer value proposition and it would be foolish for Apple to avoid it,” said Leigh. “I don’t know why they’re so adamantly opposed to the idea of renting movies.”

Leigh suggests that without a streaming DRM technology such as Netflix’s will be shut out from being viewed on Apple TV, Apple’s forthcoming device to enable video to stream from a computer to a big-screen TV.

“If consumers find that the Apple TV is the way they want to get video from computer to TV, Apple may use a digital rights management technology that none of the other companies will be licensed to use, the same way that the iPod is now the gatekeeper for DRM-protected music sold from the iTunes Store,” Leigh explained.

While the download-to-own philosophy works well with music because consumers listen to the same audio tracks over and over again, the same doesn’t hold true for movies, said Leigh.

“I tend to think that Apple has to break down on that because movies as a rental format make a lot more sense,” he said.

How it works

Netflix enables movie enthusiasts to rent movies on DVD through the U.S. Postal Service, maintaining a queue of movies for check-out on the company’s Web site. You’re not restricted by due dates or shipping fees; the service offers scaling rates depending on how many movies you want to take out at once.

Netflix introduced the streaming technology earlier this week on a limited basis to a small group of subscribers, and hopes to ramp it up into a phased rollout over the next six months. Unfortunately, as it exists now, Netflix’s streaming video service is restricted specifically to PCs running Windows, as it uses Windows Digital Rights Management (DRM) technology in order to work.

Keeping the door open

“Our goal is to be the go-to place for movies no matter what platform you prefer,” said Swayse, who stopped short of saying that Netflix would definitely support the Mac with a Mac OS X-native technology.

“Our development plans call for the streaming feature to be supported for all Netflix subscribers within the next six months,” he added. “We want to be the leading provider of movies, regardless of what computer platform you’re using.

Netflix plans to incorporate the streaming video option to its subscribers at no extra charge. As movies are made available for streaming, users will be able to click on a “Watch Now” button on the Netflix Web site.

The quality of the video will vary depending on the downstream bandwidth of the user. Users with the ability to sustain 3 megabit per second connections will be able to watch DVD-quality video, according to Netflix.

IDGNS’s Steven Schwankert contributed information used in this report.

This story, "Netflix: iTunes complements new streaming service" was originally published by PCWorld.

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