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Netflix has launched a new feature called Watch Now that will enable subscribers, at no additional cost, to watch movies immediately on Netflix.com. The new service does not limit the number of movies a customer can watch, instead it gives users 1 hour of video for every $1 they spend monthly (18 hours of online video is free with the $17.99 plan). Customers can watch 5 minutes of a movie, decide that they don’t like it, and switch to another without penalty (many online movie rental options require watching a movie within a certain time period, such as 24 hours or 14 days, or the movie will have to be re-rented at additional cost).

Unfortunately, the Watch Now feature will only be available to a few customers at this time, and it will be rolled out to all customers over the next six months.

The first thing you’ll notice is a new tab: Watch Now.

The Watch Now page gives you access to the movies available for online viewing:

Netflix recommends movies, shows you movies you’ve recently viewed (handy if you’ve only watched part of one), and also shows you movies that you can watch from your queue.

Netflix tests your Internet connection, and varies the quality of the video depending on your connection. If you have a slow connection, the start of the movie may be delayed and the quality of the movie will be less than DVD (but still very watchable). If you have a 1.6 Mbps or greater connection, the movie should approach DVD quality. I have a 6 Mbps DSL connection, but Netflix was unable to resolve the speed issue before this story went to press.

The first time you watch a movie Netflix will install the Netflix Movie Player, which only takes a few minutes. Movies are viewed in the browser, like YouTube, instead of in a separate player like Amazon’s Unbox.

The Netflix Movie Player was developed in-house, and very closely resembles the Netflix Previews feature. From the time you click play on a movie to when the movie starts is as fast as 10 seconds. I have another quirk where it asks to acquire the rights to the movie, but it works after clicking “Play.”

When you’re browsing through movies that are part of the Watch Now feature, you will see a Play button under the movie box.

Netflix keeps track of how long you’ve watched each movie, and you can view your available time via Your Account:

The Watch Now features is currently only available for Windows XP, but Netflix expects to launch the Watch Now feature on other Internet-connected platforms, such as cell phones, over time.

There will only be about 1,000 movies available to start, but Netflix hopes to have more than 5,000 this year (for comparison Apple only offers 250 movies through iTunes). Studio and network partners include 20th Century Fox, Lions Gate, MGM, New Line, Paramount, Sony Pictures, Universal, CBS, PBS, Discovery Channel, BBC, and Showtime (this list may be subject to change on launch).

You must be connected to the Netflix website to view movies, so you can’t download a movie and then watch it on a plane, but you still have your DVDs for situations where you cannot connect.

This is an interesting way to offset the defection of customers to Blockbuster and online movie download services such as Movielink, Vongo and CinemaNow.

Update: Netflix issued a press release to announce the new feature, and it has an interesting quote from Netflix CEO Reed Hastings:

“We named our company Netflix in 1998 because we believed Internet-based movie rental represented the future, first as a means of improving service and selection, and then as a means of movie delivery,” said Reed Hastings, the company’s chief executive officer. “While mainstream consumer adoption of online movie watching will take a number of years due to content and technology hurdles, the time is right for Netflix to take the first step.

“Over the coming years we’ll expand our selection of films, and we’ll work to get to every Internet-connected screen, from cell phones to PCs to plasma screens. The PC screen is the best Internet-connected screen today, so we are starting there.”

[via]