Netflix to offer online movie viewing

NEW YORK (CNNMoney.com) -- Online movie rental service Netflix introduced a new feature Tuesday to allow customers to watch movies and television series on their personal computers and said it will make the new feature available to its subscribers in a phased rollout during the next six months.

Netflix (Charts) will continue to offer DVDs by mail to customers for a fixed monthly fee. They will have the additional option of instantly watching about 1,000 movies and television series on their PCs at no additional cost, according to the company's statement.

"While mainstream consumer adoption of online movie watching will take a number of years due to content and technology hurdles, the time is right for Netflix to take the first step," said a statement from CEO Reed Hastings. "Over the coming years we'll expand our selection of films, and we'll work to get to every Internet-connected screen, from cell phones to PCs to plasma screens. The PC screen is the best Internet-connected screen today, so we are starting there."

The company's statement said its online viewing option will not require a lengthy downloading of a large video file. Instead it says it will use real-time playback technology that allows video to be viewed at virtually the same time it is being delivered to a user's computer.

Customers using the service will have to perform a one-time installation of a browser applet that will take less than a minute. Then most subscribers' movie selections will begin playing in their Web browser in as little as 10 to 15 seconds after loading.

"The new service only works on Microsoft windows browser right now," Hastings said, speaking at the National Retail Federation conference in New York Tuesday where he was awarded the "Innovator Of the Year Award."

Movies can be paused and a position bar gives viewers the ability to jump to any point in the movie.

Internet connectivity with a minimum of one megabit per second of bandwidth is required. Faster connections are needed for better quality playback of the programming, with DVD quality possible with a three-megabit-per-second connection, according to the company.

"For people over 30, maybe they won't get into it but we think that people under 30 is a place for us to start," Hastings said.

The service will base the number of online viewing hours on a customer's plan. A client with the entry-level $5.99 a month plan will be able to watch movies online for six hours a month, while those with the full $17.99 a month plan that allows them to rent three DVDs at a time will be able to watch 18 hours a month online.

The company said most of the major and many independent studios are supporting the introduction of the new feature, including General Electric unit NBC Universal, Sony Pictures and Metro-Goldwyn-Mayer Studios, which are both units of Sony (Charts), News Corp. (Charts) studio 20th Century Fox, Viacom (Charts) studio Paramount Pictures, independent studio Lionsgate as well as Warner Bros. and New Line Cinema, which like CNNMoney.com are units of Time Warner (Charts).

"The online video market has a lot of competitors," Hastings said. "There's Apple, Yahoo, Amazon.com, Google with YouTube."

"I think what's going to happen is a shakeout into three segments. There's the ad supported segment at the bottom level with Yahoo and Google. Their competitor is television content. Then you have the digital content purchase segment which includes Apple and Amazon and downloadable DVD sales. Finally you have digital rentals. This includes us and we think we will be the leaders here."

Netflix has been competing with video rental retailer Blockbuster (Charts), which has added a online rental service to the in-store rental service.

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