The Economist writes about the efforts by Netflix’s CEO Reed Hastings’ efforts:
Mr Hastings is…betting that by the time movie-download technology becomes more mature and online titles more widely available, his subscriber base for DVD rentals will be big enough to put Netflix in a strong position to prosper in the online marketplacewhere he is likely to face new competitors such as Yahoo!, Microsoft, the studios themselves and, no doubt, many start-up firms offering rival download services.
Netflix uses 35 distribution centres within metropolitan markets to help it meet its aim of overnight delivery. Yet when online delivery of movies, in whatever form it takes, eventually starts to take off, that legacy infrastructure will count for nothing: warehouses will be replaced by huge computer servers that can be based anywhere. This will not happen overnight, however. And in the transition we can do mixed mode, says Mr Hastings. If a movie is not available for downloadas many classics may not be for some timethen Netflix can still pop a DVD version into the old-fashioned mail.