Netflix appears to be one company that sees the on-demand content-distribution-model writing on the wall. In a bid to remain relevant in a world of broadband connections and instant gratification, the company is likely to offer a subscription option that skips DVDs entirely, and allows access to its "Watch Instantly" on-demand streaming videos by 2010. "We've got one singular objective, which is 'Be successful in streaming,'" Netflix CEO Reed Hastings told Bloomberg in a recent interview.

Netflix originally debuted with a DVD-by-mail rental model, which leveraged the Web by allowing customers to search the company's movie database and create a queue of movies to watch. Customers paid a monthly subscription fee to have 3 DVDs sent from the top of the queue. After watching a movie, the DVD was returned in the company's emblematic red envelope and the next movie from the queue would be sent. Netflix expanded it options with variations on this theme, which allow for different numbers of DVDs to be at the customer's home at any given time.

In 2007, Netflix added a streaming movie option for all its subscribers. Any subscriber could stream a selection of about 1,000 movies (compared to about 70,000 in DVD form) directly to a PC. "While mainstream consumer adoption of online movie watching will take a number of years due to content and technology hurdles, the time is right for Netflix to take the first step," Hastings said then. "Over the coming years we'll expand our selection of films, and we'll work to get to every Internet-connected screen, from cell phones to PCs to plasma screens."

Since that time, Netflix has significantly expanded its streaming options. There are over 12,000 titles available to stream, including movies and TV shows. The company has an agreement to stream content from Starz Play and is hoping to cut deals with HBO and Showtime that would allow it to stream premium content from those channels. Recently Netflix added the option to stream to Macs as well as Windows PCs. And, in addition to partnering with Roku to build a set-top box for streaming directly to a TV, it has also partnered with LG, Samsung, TiVo, and Microsoft to build "Watch Instantly" support into various devices, including Blu-ray players and the Xbox 360. In fact, at least 1 million Xbox 360 owners are using their Xbox to stream content from Netflix.

"Most companies that are in our shoes fail," Hastings told Bloomberg. "Most companies that have a sort of generational evolution forward, like AOL from dial-up to broadband, fail." But he expects that the company's investment in building its stable of streaming content and subscriber base will pay off as streaming overtakes rental of physical media. There has already been evidence to suggest that customers using the "Watch Instantly" feature tend to prefer it to waiting for DVDs by mail.

Currently, the company is building its customer base by selling subscriptions to its DVD rental service, which, for all but the cheapest plans, includes unlimited streaming. Those increases in its subscriber base allow it to negotiate licensing for more streaming content. "But we recognize at some point in the long term, the streaming will be good enough that an appreciable number of people will find streaming is all they need," Hastings said. The increasing popularity of services like the iTunes Store and Amazon Video on Demand suggest that Netflix is on the right track.

It's not hard to imagine that on-demand access to video content is the future. Netflix gives customers instant access to a large library of content with just a click of the mouse—and that content can be streamed to any computer or a variety of A/V equipment and appear on whatever you use as a home theater. As iTunes did with music, Netflix is ready to give customers exactly what they want for video: legal access to what they want to watch, when they want to watch it, with plenty of ways to watch it.