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Netflix Expands Streaming Service

watch now unlimitedPreempting a largely expected iTunes movie rental announcement at tomorrow’s Macworld event, Netflix announced they’ll remove all usage quota restrictions on their “Watch Instantly” streaming video service.  The change is to become effective today.

The streaming video service, on which Netflix has reportedly invested more than $40m, has been available for much of the past year.  It allows existing Netflix subscribers to watch on-demand feeds of up to 6,000 titles.  There are no additional costs to use the service.  It is offered in addition to subscriber’s existing mail order rental allotments.

Until today, the one major restriction on the service had been the quota system that limited the number of streams available per month to a maximum of five to forty eight hours of programming; the amount governed by the rental plan (2 DVD’s at a time, 3 etc) the customer subscribes to.

Under the new system the vast majority of Netflix subscribers will have unlimited access to the service.  There will be zero restrictions on how many movies they watch online.  Only customer’s paying $4.99/month to rent a maximum of two DVDs per month will remain restricted.

Netflix spokesman Steve Swassey said the move “fits within the parameters of [Netflix] overall financial goals.”  Those goals, according to comments made by CEO Reed Hastings during the October earnings conference call include: expanding online content, making it inexpensive and easy for customers to enjoy, and finding an appropriate long term financial model for online distribution.

For now, the “Watch Now” program is computer-tethered.  To watch the films, you must access the stream by a computer and watch the product either on your monitor, or a TV connected through the computer.   Later this year (likely summer or fall) that will change.   On January 3rd, Netflix announced a partnership with electronics maker LG to bundle the necessary software for viewing “Watch Now” streams into LG set top boxes and other hardware.  Netflix hopes to announce similar partnerships with other vendors as the year progresses.

Netflix earned approximately $51m on revenue of $903m during the first 9 months of 2007.  Full fiscal year results have not yet been reported.


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