• Forbes, Tuesday, January 16, 2007 11:30 AM

In order to increase the number of consumers browsing its site for new rentals, Netflix is offering movies on demand to its subscribers for free. Viewers will be able to watch movies on their computers, using a service that starts the film in seconds.

The new service, which will cost Netflix more than $40 million this year to roll out across its network, is "focused on convenience and simplicity," said chief executive officer Reed Hastings.

Here's how it works: Netflix does not monitor usage per film, but rather the time spent viewing: A subscriber paying $18 a month to be sent three DVDs at a time, for example, will receive 18 hours of free viewing, meaning she might watch nine two-hour films or browse for 1,080 minutes a month through any number of films.

Hastings isn't worried about Blockbuster or other competitors. His biggest threat is customers' time. "We've held our own on rentals, we'll nail this, too."

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