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Netflix to do digital downloads?

Variety report says company is planning service to let customers avoid snail mail. But Netflix says not so fast.

When digital download-to-television becomes a reality, Netflix wants to be the first.

In fact, the Netflix investor relations site already lists digital downloading as one of its growth strategies for the future.

"Use our market leadership position to lead the transition to high-definition DVDs and eventually digital downloading," says the Netflix corporate fact sheet (click here for PDF).

But a spokesman for the company denies that such a program is imminent, even though an executive at the popular movie download company said Netflix is looking into a download service.

Eric Besner, Netflix's vice president of original programming, mentioned that Netflix is looking into the use of proprietary set-top boxes for digital downloading, according to reports of a speech he gave at an Independent Film and Television Alliance production conference. Besner said the set-top boxes would be used to download movies to televisions overnight in lieu of mailing out DVDs, according to Variety, which originally reported on Besner's comments.

But a company spokesman said that any comments indicating Netflix was moving toward digital downloads were premature.

"We have not announced any plans for any of our download initiatives. Any comments made by Netflix employees were premature. We are investing $5 (million) to $10 million, as we did similarly last year and will do again next year, on a downloading initiative," Steve Swasey, director of corporate communications for Netflix, told CNET

But such a service is not yet in the can, in part because of two particular challenges, Swasey said.

The first one is content availability. While there's some content out there, the majority of movies are "locked up" by the movie industry and other content owners, Swasey said. He predicts that it will probably remain that way for a couple more years.

The second obstacle is getting the content from the Internet to the television. Swasey said most people want to watch movies on their TV, not their computer.

But when the time comes, will Netflix, in fact, be first?

In February, MovieBeam, with financial backing from Cisco Systems and Intel, relaunched as a video-on-demand service that sends movies to a hard drive in the home via traditional television airwaves. Former parent company Walt Disney allowed the service to launch movies simultaneously with their DVD release. Other competitors include on-demand movie services from cable companies, which, while not strictly operating on a subscription business model like Netflix, offer a download-to-rent option.

Netflix increased revenues from $5 million in 1999 to $683 million in 2005, according to company financial reports. It is currently invested in its DVD mailer system, shipping more than 1 million DVDs a day and hiring a former postmaster general as its COO.