“While there are things in the Netflix system that are clearly cannibalistic, there are things we can change,” said Kornblau, as quoted in The Los Angeles Times. “They can pay us more or we can reduce the quality of what we give them.”

1) If you treat the internet as just another distribution channel you will get what you are getting right now. Cannibalization of DVD revenues.

2) If you treat Netflix, your partner, like an adversary, you will get exactly what has happened in the past – they will get into the production business and become a competitor.

3) There is an alternative: Collaborate with your partner to take this streaming “experiment” to a higher level of quality and customer experience so Netflix delivers more, meriting a premium price vs. DVD’s, and gives you a platform that creates new possibilities to create customer value and new revenue streams.

If communication technology is going to grow the entertainment market, start thinking about “What the Customer Wants to Pay For”: http://www.huffingtonpost.com/katherine-warman-kern/what-customers-want-to-pa_b_777281.html