In an obvious attempt to attract its rival's customers to its own online movie rental service, Blockbuster will let Netflix subscribers with a Blockbuster membership rent movies from its stores for free through December 21. The Netflix member would have to exchange the tear off address flaps from their envelopes to receive the movie, the company says.

While in the store, it's fairly likely Blockbuster will use the opportunity to promote the new Total Access feature of its own online rental service launched in November. Subscribers are now able to return their movies in-store in exchange for free rentals. Blockbuster Online needs all the help it can get to attract customers - its 1.5 million users trail Netflix's 5.7 million subscribers.

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Looking to improve the personalized recommendations process, Netflix on Monday announced the Netflix Prize, a $1 million contest that awards the first researcher who can reach a certain level of accuracy in recommending movie picks.

After a period of significant advancement in the field, innovation has slowed dramatically. Thus, the Los Gatos, Calif. based movie rental firm was spurred to create the contest to urge researchers to look into better ways to employ recommendation systems.

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Netflix's apparent attempts to force Blockbuster out of the online rental market were stopped for the time being on Tuesday, as a federal judge ruled that Blockbuster would be allowed to proceed with its antitrust case against Netflix. The lawsuit was filed in response to a patent infringement suit filed by Netflix in April of this year.

That case attempted to shut down Blockbuster Online through an injunction. Netflix claims Blockbuster infringes on two patents, one related to the automatic queue, and another that allows for the automatic receipt of new DVDs as well as reorganization of the queue.

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Netflix said Wednesday that it had struck an agreement with NBC to allow subscribers of the movie rental service to have the opportunity to see the premiere episodes of two new dramas before they are broadcast. The deal, the first of its kind, will make "Studio 60 on the Sunset Strip" and "Kidnapped" available for rental six weeks before the two shows debut.

As well as allowing customers to view the premieres, the DVD will also include preview trailers highlighting other new fall dramas to make their debut on the network. The DVDs will begin shipping August 5, and the promotion is slated to end on September 17.

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Responding to a report in Variety, Netflix late Tuesday acknowledged that it was exploring the idea of allowing users to download movies over the Internet, but said it had no firm plans. The explanation came in a regulatory filing intended to clarify remarks made on Friday.

At the Independent Film and Television Alliance production conference on Friday, Netflix vice president of original programming Eric Besner commented that the company was developing a set-top box that could be used for digital downloading. Netflix has long said movie downloads was part of its future plans.

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Blockbuster shot back at Netflix on Tuesday, filing a antitrust counterclaim in federal court saying that the online movie rental service's lawsuit is based on unenforceable patents. The company also says that Netflix is attempting to monopolize the online rental business.

With 1.3 million subscribers as of the first quarter of 2006, Blockbuster Online is much smaller than Netflix, which has close to five million members. The brick and mortar movie retailer has made online rentals a key part of its future business, as in-store revenue is expected to fall by as much as a quarter through the end of the decade.

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Netflix is set to enter the movie distribution business, beginning with the independent film "Sherrybaby." Through its newly created Red Envelope Entertainment division, Netflix would own the theatrical, DVD, television and download rights to the movie within North America.

"Sherrybaby" stars Maggie Gyllenhaal and received a lot of attention at this year's Sundance Film Festival. Gyllenhaal plays a woman struggling to keep her life on track, and follows her release from prison and struggle to maintain custody of her child.

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A revised class-action settlement involving online DVD rental service Netflix has been approved six months after an original settlement was proposed. Netflix had been sued for promising "one day delivery" and "unlimited" rentals after it disclosed it delayed DVDs to frequent renters.

San Francisco Superior Court Judge Thomas Mellon Jr. had taken issue with a number of points in the initial settlement, including a payout of $2.5 million to lawyers involved in the case. The FTC voiced its opposition in January saying, "the settlement would serve more as a promotional vehicle for Netflix."

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Netflix is attempting to have rival Blockbuster Online shut down by suing Blockbuster in a federal court in Northern California on Tuesday. The company claims its biggest competitor is committing patent infringement and is asking for an injunction to bar Blockbuster from allowing online rentals.

Two patents surrounding online DVD rental are held by Netflix. The first was awarded in 2003 and covers the concept of the automatic queue, which customers add to from the company's library and then receive movies in a customizable order of preference.

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Following through on a promise made earlier this year, Netflix has quietly launched a new feature that enables subscribers to obtain their movies in HD DVD, if available. With the high-definition format still getting off the ground, however, few titles are currently offered.

Netflix subscribers must first set up their account for HD DVD through the service's Preferences page. A "Format" column will then appear in the Netflix rental queue, and customers can select HD DVD to be the default rental format. Netflix plans to support Blu-ray when the Sony-backed format launches in May.

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Online movie rental service Netflix announced Tuesday it planned to support both new high-definition DVD formats upon their launch later this year, pledging to carry all initial HD DVD and Blu-ray movie titles and make them available for customers.

The company acknowledges that initial adoption of the formats will be slow, but it believes high-definition formats will eventually replace standard DVDs as prices fall. Toshiba expects to launch its first HD DVD player in March, and Blu-ray players will likely follow in May.

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William Henderson has found out that working for the U.S. Postal Service may not be so bad after all. The 58-year-old former Postmaster General is now the Chief Operating Officer of Netflix, replacing Tom Dillion, who plans to retire in April. The company cited Henderson's experience with large amounts of mail as one of the primary reasons for his hiring.

Henderson was the Chief Operating Officer of the USPS from 1994 to 1998, and was promoted to CEO and Postmaster General in 1998. He held both positions up until his retirement in 2001. "Bill Henderson is about the only person on the planet who looks at our volume of mail as a trickle," Netflix CEO Reed Hastings said in a statement.

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The Federal Trade Commission has filed an amicus brief in opposition of the proposed Netflix class action settlement. The company was sued for advertising "unlimited" DVD rentals and "one day delivery" when it couldn't guarantee either. The FTC says the settlement is not beneficial to consumers.

As previously reported, Netflix agreed to provide customers with a one-month service level upgrade free of charge. This means that Netflix users subscribed to the 3 DVDs at-a-time program will be upgraded to 4 DVDs at-a-time for one month. After the free month, customers must remember to downgrade their service manually or face higher fees.

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Netflix has settled class action lawsuit brought against the company last year for allegedly duping potential customers by advertising "unlimited" DVD rentals and "one day delivery." Current and former Netflix customers will receive a one-month perk, but the real winners of the settlement are the lawyers.

While not admitting any wrongdoing, Netflix will provide customers with a one-month service level upgrade free of charge. This means that Netflix users subscribed to the 3 DVDs at-a-time program will be upgraded to 4 DVDs at-a-time for one month. After the free month, customers must remember to downgrade their service manually or face higher fees.

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Netflix on Wednesday said that its planned movie download service is on hold indefinitely due to licensing problems with Hollywood studios. Word of a possible download service first leaked out in July when a glitch in the Netflix system revealed that the company was planning to offer online movies.

Netflix CEO Reed Hastings made the announcement during a conference call with analysts. "When the content climate begins to thaw," the service will be launched, Hastings said. Work is continuing on the necessary infrastructure in order to make a launch possible, but Hastings did not specify how movies would be delivered.

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