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More mainstream movies for Netflix online

October 1, 2008 |  9:35 am

Jm5pi5ncsuperbad2_2 Netflix Inc. moved one step closer to delivering on the promise its name implies: providing movies via the Internet.

The Los Gatos company struck a deal with  premium movie service Starz Entertainment that will allow Netflix subscribers to watch such mainstream movies as "Spider-Man 3," "Ratatouille, "No Country for Old Men" and "Superbad" on demand online.

The agreement represents a milestone for Netflix, whose online film offerings have, until this point, been limited to what would be charitably described as "niche" offerings, heavy on sophomoric humor ("National Lampoon's Pledge This!"),  horror ("BloodRayne II: Deliverance") and art-house fare ("My Summer of Love").

That's because the premium cable services -- HBO, Showtime and Starz -- pay big money to lock the rights to distribute Hollywood movies, once they've left theaters and been released on DVD. These contracts keep recent releases off fledgling Internet movie services once they enter this exclusivity period, known as the pay-TV window.

"We have 100,00 movies on DVD and 12,000 movies to stream," said Netflix Chief Content Officer Ted Sarandos, noting the disparity between the company's physical and digital catalogs. "The biggest gap is television exclusivity."

The Starz agreement helps to narrow that gap. Netflix subscribers who have unlimited plans, which start at $8.99 a month, gain access to the 2,500 movies and other video offerings from Starz as part of the package.

"This solves a huge problem for Netflix, because so much of the criticism about the instant-watch feature is it's just cruddy content," said Kurt Scherf, vice president and principal analyst for researcher Parks Associates.

The streamed Hollywood offerings, however, are limited to two major studios: Walt Disney Studios and Sony Pictures. Netflix's online service won't have access to movies from Warner Bros., Fox, Paramount or Universal because they have deals with other cable services.

Starz, for its part, gains wider distribution for its broadband subscription movie service, Starz Play. It reached a similar arrangement in March for Verizon's more than 8.5 million broadband subscribers.

"Anytime you can have your content out there in front of the customer, I think it's a good thing for you," said Starz President and Chief Operating Officer Bill Myers.

Bobby Tulsiani, an analyst with Jupiter Research, said long-form content is slowly finding an audience online. About 9% of the people surveyed by the technology research group said they had watched a full-length movie online within the past year, and more than twice as many, 19%, said they tuned in to television shows on their computers.

Netflix, whose principal business remains delivering DVD movies by mail, is moving its business to meet the audience. Wedbush Morgan Securities analyst Michael Pachter estimates that 10% to 20% of its 8.4 million subscribers use the streaming service regularly. Netflix declined to comment on the estimate.

The company is steadily bolstering the online offerings, last week striking a deal with CBS and Disney-ABC Television Group to offer new and syndicated shows over the Internet, including "CSI," "Hannah Montana" and "Star Trek."

These content deals are clearly sending online viewers to Netflix. Traffic to the store rose to 12 million, up 24% from a year ago last August, according to online audience measurement firm ComScore Media Metrix. Rival Blockbuster saw its visitors dwindle by roughly the same percentage, sagging 21% to 5.3 million. Perhaps this explains the retailer's renewed affection for bricks and mortar.

--Dawn C. Chmielewski

Photo: "Superbad" stars Chris Mintz-Plasse, left, Jonah Hill and Michael Cera. Credit: Ringo H.W. Chiu / For The Times

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