I watch an average of seven movies a week and before you comment let me say I'm fully aware that this is well above the norm and I need to consider some form of rehab. It is not my fault entirely; there are a number of enablers who conspire to help me feed this shameful celluloid addiction. I implicate the local multiplex theater as a culprit but the two drug dealers that bear the most guilt are Amazon and Netflix. I get DVD's from the former and have a long running rental subscription with the latter. So I was especially interested in a recent development with one supplier that will significantly affect our current business arrangement. Amazon, the world's largest online retailer, is dipping its’ not insignificant toes into video rentals, the domain of my other dealer Netflix.

The announcement this week sent Netflix into a panic, or at least their nervous investors who, like rats leaving a sinking ship, unloaded the company's stock. A bit prematurely if you ask me since the imminent demise of the world's premier online DVD renter had been foretold before. The first forecast of doom for Netflix was after Apple launched its iTunes Store rental service. There were fears that suddenly there would be a mass exodus of Netflix subscribers to iTunes but that did not happen. iTunes may have looked sexier but Netflix had the first to market advantage and its library boasted over 100,000 DVD's and 10,000 streaming offerings, far more than Apple's which had only 1000 titles available for streaming.

Amazon's video-on-demand (VOD) is positioned as a competitor to both Netflix and iTunes. The new VOD should not to be confused with their much maligned Amazon Unbox service which needed proprietary software in order to watch the movies and worked only on the PC but could be transferred to a connected TiVo box. UnBox also required you to download the full movie to your hard drive before you began watching it; a lot to ask in this age of instant gratification. The company harps the fact that on their new browser based service movies will be streamed directly rather than downloaded and start almost instantly. Don't want to rain on your parade Amazon but this is hardly a groundbreaking innovation since Netflix only offers direct streaming not downloads and the competition, iTunes, uses progressive downloads where the video starts playing once the first few seconds have been downloaded and continues as the rest of the movie gets saved.

Unlike Netflix which offers up 10% (about 10,000) of its total library as free unlimited streaming titles to its paid subscribers, Amazon will charge for its starting selection of 40,000 titles. Free is everyone's favorite price and it seems that Netflix has the edge here but the majority of the selection they provide as free streams to members are TV shows and movies that are well past their sell by date or independent low budget titles. Simple economics at work here kids; studios are not likely to offer up their prime properties to be part of a free unlimited service in exchange for tiny royalties when they can make beaucoup bucks on regular DVD rentals or sales. Offering movies and shows for free both cannibalizes their main revenue stream and devalues the content.

The feather in Amazons rental cap is a feature called "Your Video Library". Think of it as mission control or Grand Central Terminal for your purchases. Once you download a title it is stored in Your Video Library's vault and you can access that content from any other terminal you log into. Basically the movie you bought using your office computer when you were supposed to be reviewing that report can be watched when you are back at home simply by logging into your account. This, in one masterful stroke, eliminates the need to copy or backup purchases and should prove to be quite attractive to studios who are very concerned with redistribution of their copyrighted material once it has been downloaded. Amazon is jumping into bed with Sony to get their streaming store on the Wi-Fi enabled Sony Bravia HD TV series so you can watch your library in glorious hi-def on your TV rather than hunched over a computer monitor. But it will be crowded under that digital-download-to-home-theater blanket since Netflix has already teamed up with LG and California based electronics maker Roku, while Apple has the "ahem" Apple TV and even Microsoft is getting in on the act.

Although it would be jumping the gun to start counting the days to the demise of the company there is legitimate cause for agitation in the Netflix boardroom. While Netflix is a goal specific site where one goes with the intention of procuring a rental, Amazon is this vast entity whose tagline is "Earths biggest selection". A warehouse of everything from books to electronics to furniture to gourmet food and even auto parts. So in theory someone who logged on to the site to on the site to get a Freddy Kruger Halloween mask may also end up renting "Nightmare on Elm Street" if it's suggested to them even though that was not their original mission. The sheer number of daily visitors to Amazon gives them, again in theory, a larger pool of rental prospects.

But before any Netflix employees start posting their resumes on monster.com in anticipation of being pink slipped they should remember that the company has a trump card left in their deck. Compared to the massive $2.1 billion DVD market the number of people who download full length movies is minuscule. And Netflix owns 8.2 million subscribers, a lot of whom like being able to review and recommend movies or see what is on a friends list. This gives the service a social networking aspect and with community comes loyalty and it would be way easier for Netflix to convert its user base to on-demand digital streaming than it would be for Amazon to build up a following from scratch.

With development costs and marketing it will take a while for Amazon VOD to generate any significant profit. That is assuming Amazon's goal is to just make money. It could simply be another check mark in a laundry list of ingenious strategies to solidify their position as the world's leading online retailer. Their top secret master plan to carry everything one could possibly need. But watch out when they start selling health insurance next to bungee jumping equipment. So if Netflix just takes a moment to calm down it will realize that things are not as dire as they seem. Netflix is a battle tested veteran of the rental wars, a site that took on the dreaded Blockbuster and survived, so it should just go back to mailing out those ubiquitous red and white envelopes and as fast as it can.