BROOKE GLADSTONE: This is On the Media. I'm Brooke Gladstone.

BOB GARFIELD: And I'm Bob Garfield. Netflix recently debuted a new much-awaited, streaming-only option for its customers. At around eight dollars per month, the plan is a cheaper alternative for consumers who primarily use the movie rental website’s Watch Instantly option, which is a lot of people. The company that started out renting DVDs through the mail now delivers more content online than it does through the post office. The demand for Netflix streaming has grown so much, in fact, that it accounts for 20 percent of all download traffic during peak Internet times. There’s just one problem. Netflix’s difficulty in acquiring content licenses means its streaming library is much smaller than its DVD library. The company is on a mission to increase the size and quality of its streaming catalog, but a threatened cable and media industry may not make it very easy for them. Writer Tim Arango has been following the Netflix saga for The New York Times. Tim, welcome to OTM.

TIM ARANGO: Thank you for having me.

BOB GARFIELD: It wasn't so long ago that this was a company that almost quaintly would deliver DVDs by mail, and just doing that had an effect on the movie business. Is it true that they're no longer seen as a benefit to Hollywood, but as a threat?

TIM ARANGO: Well, when they came around in the late nineties they were eagerly embraced as additional revenue to the DVD sales business. They came at a time when no one was quite sure about the future of online video and they said, hey, let us try this out, give us a good deal, and this is just going to be some extra revenue for you. And the media companies and the studios didn't anticipate that it would be so spectacularly successful that it would end up in a very short order being a real threat to the economics, particularly of cable television.

BOB GARFIELD: Cable is in competition with Netflix on its video-on-demand, and cable fetches a lot more for a movie than Netflix does, right?

TIM ARANGO: Absolutely. And one of the arguments that a lot of people make is that Netflix has been so successful because the cable companies have not been able to provide a very good on-demand service as an alternative. They don't have the selection that Netflix does, and it often doesn't work. The second part with the cable economics is that economic model where customers pay per month, you know, 100 bucks, 125 bucks, that’s been the most durable of any of the media businesses, and for the first time in history this year cable television subscriptions are down.

BOB GARFIELD: In your piece you talk about the 25 million dollars that Netflix originally paid STARZ for access to a whole mess of movies, and now you say that it’s going to cost Netflix 250 million [LAUGHS] dollars to renegotiate when the contract expires next year. Why was STARZ in a position to give them rights to anything?

TIM ARANGO: Because when STARZ did their deal with Sony and Disney, they kept the rights to digitally exploit those movies, to stream those movies, and I think STARZ just felt like, okay, this is not going to impact our business; people are not going to think about cutting cable, his will be extra. So that’s why it was so low.

BOB GARFIELD: You know, we've been discussing movies, Tim. Netflix also will stream TV programs but nothing that is currently in season. There is a lag. How is that going to play out?

TIM ARANGO: Well, we've seen one very recent deal that has caused shockwaves in the media industry, and that was the deal with NBC for Saturday Night Live. On Netflix now you can get Saturday Night Live the next day. It actually goes up Monday, but the deal is for the next day, Sunday. That caused a lot of consternation at other companies because that could really impact the business model of syndication. It can impact the business model of, you know, reruns and things like that. Netflix is trying to get fresher and fresher TV content, and you'll see a big resistance to that because then if you can get TV shows the next day, the next week, you really have to answer the question, why am I paying for cable.

BOB GARFIELD: So your best guess, when it comes to streaming Hollywood films, or any other kind of film, for that matter, who do you see as being best positioned to dominate, let's say, over the next ten years?

TIM ARANGO: I think my best guess is that Netflix probably won't be able to keep up the same momentum that they have. I think their success has been a wakeup call to the big media companies that they need to act faster to offer their own alternatives. And I think you'll see experimenting with cable packages so you can have smaller tiers, and I also think you’re going to have this idea that Jeff Bewkes at Time Warner talked about where if you’re an authenticated cable subscriber you can get all those channels online, on any device. And I think they're going to move faster at that, and I think in doing so they will protect their business model.

BOB GARFIELD: TV Anywhere they call that, right?

TIM ARANGO: TV Anywhere, absolutely.

BOB GARFIELD: It sounds like a very chaotic scenario.

TIM ARANGO: The whole thing is very chaotic. That’s what’s made the whole story very, very interesting, ‘cause in such a short time Netflix has positioned itself at the center of this entire debate about the future of how Americans and people all over the world will watch television and movies in their home.

BOB GARFIELD: Tim, thanks a lot.

TIM ARANGO: Thank you.

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BOB GARFIELD: Tim Arango writes for The New York Times.

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