June 7, 2007, 12:00 AM

Netflix turns to instant movies online to stay ahead

Netflix is leading the pack in online DVD rental, but CEO Reed Hastings knows it won’t last forever. To stave off decline, e-retailers like Netflix need to innovate at the speed of the Internet, he says.

Bill Briggs

Senior Editor

Netflix is leading the pack in online DVD rental, but CEO Reed Hastings knows it won’t last forever. To stave off decline, e-retailers like Netflix need to innovate at the speed of the Internet, he says.

Hastings, founder, chairman and CEO of Netflix Inc., was one of two keynote speakers at the Internet Retailer 2007 Conference & Exhibition in San Jose, CA. Although his movie rental business has 6.8 million members and 80,000 titles, and ships 1.6 million DVDs per day, computer-based movies and TV shows are the latest and greatest things for Netflix.

Netflix competes with companies that offer mail-order movie rentals and/or PC-based film downloads and streaming movies. “We’re bundling them to get an advantage over those who do one or the other,” Hastings said.

The new Instant Movie program enables Netflix members to click a tab on the home page to watch movies in real-time on a PC. The basic program costs $4.99 for five hours of viewing time, usually two movies.

Rather than present movies as a lengthy download experience, Netflix wanted to differentiate the product by offering virtually instant viewing, after a 15 second buffering period. Movie service customers can stop a movie at any time, leave the site and resume viewing later at the stopping point and skip around various points of a film.

Netflix, No. 18 in the Internet Retailer Top 500 Guide, has 2,000 titles available in the new program so far and video quality meets or exceeds existing DVD technology, Hastings added.

The company’s twin goals were to offer something new-and easy. “We’ve done a real-time streaming interface to make an effective, lightweight experience, not a big downloading thing,” he says. After leading the way in online DVD rentals, Netflix and other e-retailers are faced with similar tasks. “The big challenge is how to invent this new world,” he added.

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