Shifting Online, Netflix Faces New Competition

Even though Netflix's arch rival Blockbuster has filed for bankruptcy protection, the victory lap will have to wait. The company that filled American mailboxes with red envelopes containing DVDs is already fighting the next war.

Netflix's competition with Blockbuster is an artifact of another age — the DVD era. The main battlefront has shifted online, where consumers are streaming movies and television. Netflix faces a number of well-financed and innovative companies like Apple, Amazon and Google, as well as the cable TV providers. This time the war will not be won by the company that perfects the logistics of moving DVDs, but by whoever can best negotiate with Hollywood studios. "They are fighting a much different battle than Blockbuster," said Jim Lanzone, the chief executive of Clicker, an online television guide. "Today's war is for Internet television, and Blockbuster was never really relevant to Internet television." Analysts expect the company to begin closing some of its 58 distribution centers as DVD rentals decline. The company has said it is not making any more major investments in the centers. Netflix is making less revenue per customer as streaming catches on because customers are subscribing to less expensive plans, with fewer discs and unlimited streaming. But the company is gaining subscribers at the rate of nearly 50 percent a year.