Netflix Still Needs a Fix

"Netflix has proven that there is a large market for a subscription-based movie service," says Aram Sinnreich, managing partner with Radar Research. "It's kind of an accident of technology that they launched it during a time when it made more sense to use the U.S. mail than broadband Internet connections to deliver movies, but that time is coming to a close. Apple has been very successful selling video content through iTunes, and it's clear that where we're going in the long-term is Netflix minus the postal service, and this is the beginning of that."

The company's closest competitor, Blockbuster (BBI Quote) has managed to grab back some market share by adopting a subscription service of its own and using its vast network of stores throughout the country to offer consumers instant gratification in receiving new movies. Internet distribution offers Netflix a way to one-up Blockbuster when it comes to convenience.

To be sure, Netflix's plan does have drawbacks aside from the limited offerings. At first, Netflix's "watch now" feature will only be available for use on Microsoft's (MSFT Quote) Windows operating system, which excludes the growing population of Mac users.

Swasey says the company is targeting PC users first because "the vast majority of folks" are Windows users. Ultimately, he says, Netflix wants to be "the company that delivers movies over the Internet on whatever platform you're on."