Movie rental service Netflix plans to deliver movies via the Internet. Money saved by sending movies directly to consumers' homes via the Web could be plowed back into buying more DVD titles to meet customer orders.

It is estimated that the service will have 5 million members paying $22 (£12) a month by 2006.

Another option would be to send digital movie files to existing set-top boxes like TiVo.

But delivering movies on-demand electronically will put Netflix in competition with some powerful, entrenched interests fighting for consumer and advertising dollars including cable and satellite TV operators and cable movie channels like HBO and Showtime.

Moreover, five of Hollywood's major studios have formed an online movie download service called Movielink, and a sixth studio, Lions Gate Entertainment, backs Web-based film provider, CinemaNow.