Netflix, the company that mails DVDs to your house and has made Blockbuster and Hollywood Video nearly irrelevant, has increasingly become known for their instant streaming service. About 1/5 of their library is available to stream instantly through the internet onto your computer. Or XBox 360. Or Playstation 3. Or Wii. Or iPad. And now they have added even more titles available through this service, continuing to rob the Postal Service of the one regular deliveries they could still count on, Netflix DVDs.

The film and television industries have had the same difficult relationship with the internet as the more-publicized music industry. The internet makes more movies and television shows available to a wider audience than ever possible before, but piracy combined with an old industry model have caused profits to plummet. These days, if you want to watch a TV show, you can watch it when it plays on the channel that shows it or buy the DVDs. Or you can watch it On Demand, on the network’s website, on Hulu, on a website that illegally streams the episode, or download a torrent. While On Demand, the network’s website, and Hulu are all ad-supported, the ads there bring only a small amount of revenue because of the small quantity and difficult pricing models due to the sporadic nature of viewing on through these methods. These are not long-term options, but rather an attempt to capture some revenue since consumers will watch TV shows online regardless. The desire to capture some of this revenue is what was behind the writer’s strike a few years ago, and the insignificant nature of these revenues is ultimately why few changes were made.

Netflix has possibly found a profitable model. As stated earlier, they have already defeated their two major competitors. A new model for rental services will not be able to do much for the movie and television studios though. While the studios make money through rental agreements with rental shops like Netflix and Blockbuster, they make much more by selling the DVDs or Blu-Rays outright.  These discs are very cheap to produce and represent the one great new revenue stream for the studios in the past decade. They also provide a higher-quality product and more options (very few DVD extras are available over the internet), meaning they won’t go away.

The networks and studios could offer a service similar to that of Netflix, where a monthly subscription will give you online streaming rights to their products. But doing so would compete directly with Netflix, who have already established both an infrastructure and consumer base for this specific service. This is why even though Blockbuster now offers online delivery services, Netflix still dominates.

Netflix’s online video library expansion is great news for subscribers and bad news for its competitors.  However, its effect on the entertainment industry as a whole is unclear. Studios cannot just try to piggy-back on them, but a long look at this decade’s biggest success story in the entertainment industry (outside of Avatar) could yield some clues on how to survive in this era of high-quality internet access.