Back in December I wrote that Blockbuster had sought to take the air out of Netflix's sails by letting Netflix customers get free rentals at Blockbuster stores.

The next move was up to Netflix, and a couple of weeks ago it responded: it has started showing movies and TV episodes over the Internet, giving its subscribers gratification that's even more instant than driving to the local Blockbuster store. And the move comes as Netflix, the market leader in renting DVDs by mail, gets ready for the growing use of Internet delivery of movies, which will greatly eat into its disc rental business.

Only a fraction of the company's six million subscribers will initially have access to the "Watch Now" feature, which is available at no additional charge. Netflix plans to expand the instant viewing service to about a quarter-million additional subscribers each week. The service involves streaming content over the Internet, not downloading films to the user's computer.

Netflix expects to introduce the instant viewing system to about 250,000 more subscribers each week through June to ensure its computers can cope with the increased demand.

About 1,000 movies and TV show will be available initially for online delivery; the company's DVD library features more than 70,000 titles. Subscribers will have an allotment of online viewing time linked to how much they pay for their DVD rentals. Subscribers with the company's $17.99 monthly plan, its most popular package, will receive 18 hours of Internet viewing time.

Blockbuster's "Total Access" promotion, which let Netflix customers get a free rental if they presented a red Netflix envelope, enabled Blockbuster to add 700,000 new subscribers during the December quarter of 2006, giving Blockbuster an online customer base of about 2.2 million.

Netflix expects to end 2007 with approximately 8 million subscribers.