No Longer Tiny, Netflix Gets Respect- And Creates Fear

After years as a bit player in entertainment, Netflix Inc. is being eyed for a new role by Hollywood: industry hulk.

The Silicon Valley company has successfully expanded its mail-order DVD rental service to delivering video online. Meantime, the rise of Internet-connected TVs and disc players means that Netflix's electronically streamed movies and TV shows are reaching living rooms, not just computers.All that poses a potential threat to the traditional way consumers watch movies and TV: cable, phone and satellite systems.

Netflix had 16.9 million subscribers at the end of September, up 52% from a year earlier. Meantime, over the past two quarters, the number of U.S. households that subscribe to cable and other paid TV services fell for the first time since the dawn of cable—by about 335,000 households out of about 100 million, according to data provider SNL Kagan.

Netflix's growth surge—at a time of weak DVD sales and increasingly fragmented TV audiences—prompts concern among movie and TV studios as well as other technology companies. One big worry is that the company could end up dominating the electronic distribution of movies and TV the way Apple Inc.'s iTunes Store dominates music.

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