PlayStation will run movies from Netflix

Sony (SNE) and Netflix (NFLX) announced late Sunday that the movie rental company will offer films over the internet that can play on the PlayStation 3. According to the deal, PS3 subscribers will have access to movies from the rental service by loading a new Blu-ray disc, available free from Netflix, into the game console.

The alliance should give both companies a much-needed bump in sales. The PS3 console outsold the Microsoft (MSFT) Xbox 360 and Nintendo Wii in the U.S. last month, but price cuts fueled many of those sales. Sony needs something to help sustain an advantage over its two powerful rivals.

Sony claims nine million PS3 owners in the U.S. and Netflix says it has over 11 million subscribers. The joint venture may prove more valuable to the film rental company than to Sony. Netflix is trapped in a business that is slowly dying. It nearly ruined Blockbuster (BBI) by replacing in-store rentals with a program that allowed customers to order DVDs online and get them through the mail. But, in turn, the digital age is destroying that system. Several companies now offer movies that can be streamed or downloaded over the internet, and some of these, like premium video service Hulu, are getting quite large. Every major cable company also has feature film VOD available through customer set-top boxes.

Netflix has to move most of its customers onto digital delivery platforms -- and soon. The PS3 is one more way for the movie rental company to get there.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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