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The Netflix instant streaming service is free to subscribers of the company’s disc rental service. Many customers love the streaming service, and some get more Netflix content from the Internet than from their mailbox. The one knock on the service is the fact that almost all of the content is , well, rather old. There are some classic movies, and a lot of old episodes of some great TV shows, and some excellent foreign titles. The point is that it is incredibly convenient, and it was the first signs of the Internet camel’s nose beginning to peek under the video delivery’s tent.

Well, now a bit more of the camel’s nose is showing. Netflix announced this week that it has an agreement with Relativity Media to stream the company’s first-run theatrical films at the same time that HBO and Showtime get them. Reality Media is the company behind hits including “Get Him to the Greek” and “Robin Hood”. This means that instead of having to wait years after the release of a movie on DVD, Netflix will be able to stream the movies just months after the DVD hits the shelves.

Colin Dixon of The Diffusion Group (TDG) made an interesting observation about this announcement: “As long ago as May of 2009 TDG identified premium PayTV as Netflix’ true competition.” As I’ve been saying, Netflix clearly is positioning itself for the day when it doesn’t have to manage an enormous inventory of plastic discs and cope with the steady increase of postage costs. The competition is not Redbox and Blockbuster; it’s HBO and Showtime and Starz and the on-demand offerings by the subscription TV services.

Netflix is clearly succeeding, as about three out of four subscribers apparently are using the streaming service. If people start getting their movies and archived TV episodes from Netflix (and Hulu), how much are they going to be willing to pay for all those channels that they don’t watch on the subscription TV services? This is going to increase the pressure on a la carte pricing, which I contend will be the end of subscription TV as we know it. Those services will have to become data transmission utilities delivering the Internet to your home.

(And you know what would accelerate the process? If ESPN were to expand its online streaming offerings to match what’s available on the subscription services — even at a monthly fee – I expect that users would cut the cable cord in droves. ESPN is one of the remaining valued content sources that is not available over the air or by streaming.)

So this announcement definitely qualifies as a BIG DEAL. It’s another incremental step in the redefinition of Netflix and video content delivery. The world of television is changing right before our eyes.

Posted by Alfred Poor, July 9, 2010 6:00 AM

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About Alfred Poor

Alfred Poor is a well-known display industry expert, who writes the daily HDTV Almanac. He wrote for PC Magazine for more than 20 years, and now is focusing on the home entertainment and home networking markets.