Netflix Watch Instantly

Studios are getting a little itchy when conversation turns to the Watch Instantly streaming-movies feature spearheaded by DVD purveyor Netflix.

The Netflix leadership has been hailed as conquering heroes in some quarters for their success in cutting deals to build up a substantial library of movie content available legally, on demand, over the Internet. Some say Netflix is now a major player in the industry, and a thorn in the side of traditional Hollywood partners like television networks and cable movie channels.

But studios who see profits evaporating as Netflix sells access to thousands of movies for a song seem ready to get tough with the little company that could. At least Warner Bros. is. “Is the Albanian army going to take over the world?” Time Warner exec Jeffrey L. Bewkes asked The New York Times in a story about Netflix last week. “I don’t think so.”

Netflix Watch Instantly seemed like an afterthought on its launch in 2007, when few viewers watched full-length movies over the Internet. But today, with a slew of devices on the market that will play Internet video on your TV, those streaming movies — which are already bundled with a DVDs-by-mail subscription from Netflix — look like an attractive entertainment option. Suddenly, Netflix starts to seem less like a zippy alternative to Blockbuster and more like a competitor to big-money cable outlets like HBO and Showtime.

The Netflix streaming library includes a lot of older, indie, and semi-obscure material — a treasure trove for film buffs, but nothing too attractive to the mass audience. But a $25 million-a-year deal Netflix made with Starz back in 2008 gave it access to fairly recent mainstream titles from Sony and Disney. That was the bargain of the century. A more recent agreement Netflix made with Epix, which controls rights to movies from Paramount, Lionsgate, and MGM, will cost a reported $1 billion over the life of the deal.

A billion dollars? Now you’re talking about real money.

Business reporters perked up at that news, some of them casting Netflix as a scrappy competitor that was ready to play with the big boys. The big boys were unimpressed. Despite the 90-day window imposed between a film’s debut on Epix and its availability for Netflix streaming, Time Warner Cable — which didn’t carry Epix in the first place — claimed the channel had been devalued.

One thing about Netflix’s business plan seems certain — the company does streaming right. The quality was shaky to start, but these days it’s typically comparable to a good DVD (depending on the transfer, of course) especially if the film is available in high-definition. (The high-capacity Blu-ray Disc is still leagues ahead in terms of image quality.) The films are not preceded by or interrupted by ads or previews. The selection can be idiosyncratic, but it’s deep — full of low-budget indies, out-of-print gems, and even never-on-DVD obscurities.

Though I love digging into the Netflix library from the comfort of my couch, it may be unsustainable. With unlimited streaming plans starting at $7.99 a month, a user could watch or sample dozens of movies in a month with an imperceptible per-title return to Netflix. The streaming model is exciting, especially when it’s as comprehensive and compelling as the one Netflix uses, but it needs to be lucrative, too. There are indications that studios are on the verge of trying to launch their own streaming-movie services. I wish them well, but hope they remember the lesson that iTunes taught the movie industry — affordable, inclusive, and user-friendly trumps pricey, restrictive, and user-frustrating every time.

What do you think — are consumers getting movies too cheap these days, or does Netflix really know what’s best?