Netflix Unleashes its Movie Streaming

Netflix is removing the limits from its online movie streaming service — just one day before Apple is expected to announce its own movie rentals. Netflix will now allow its seven million subscribers to watch as many hours as they want from a library of 6,000 instantly available films online. Previously, customers could only watch up to 17 hours online, depending on which subscription plan they had.

In addition to stealing some of the thunder away from Apple’s widely expected movie rental announcement at Macworld tomorrow, the move augments Netflix’s recent partnership with LG for a TV set-top box, which isn’t just a shot at Apple TV, but one at Vudu, TakeTV, Amazon and all the other players jumping into the increasingly crowded set-top field. With 6,000 titles available now, that number is bound to increase by the time the LG box launches.

Most importantly, however, Netflix’s removal of online limits is the first step to weaning the DVD-by-mail service provider off physical products and postage. It means fewer shipment centers and fewer fulfillment issues, and Netflix may even manage to sidestep the 17-cent- per-floppy-envelope surcharge the postage service was reportedly thinking of charging them. Or at least the hassle of redesigning the red envelope.

Obviously there would still be costs associated with bandwidth and re-licensing its library, for which Netflix would most likely have to raise subscription fees to compensate. But like any good salesperson, Netflix can use the lower price to entice people now, get them hooked and then jack up the rates. And it’s not like people are going to instantly ditch their mail service.

With Apple’s movie rentals rumored to be $3.99 a pop, it will be interesting to see how the per-movie vs. subscription models stack up.

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