Netflix, TiVo Plan Leaves Viewers Hanging

But industry observers note that the licenses for this digital media, held by Hollywood studios, may not allow Internet DVD distribution. Meanwhile, closely held Internet video rental upstarts like MovieLink and CinemaNow have already carved out movie-on-demand turf through licensing of compressed digital videos.

"Given that neither Netflix nor TiVo possess TV-deliverable content rights or a network," writes Vintage's Kidd, "we are left wondering how the coupling of these two companies can produce something superior or even competitive to what someone's pre-existing cable or satellite provider can deliver."

On Friday, Netflix rose $1.15 to $16.57, putting it just shy of its Sept. 7 high off the Newsweek report. TiVo added 27 cents to $6.89, leaving it a dollar above its peak that day.