Why will this be tough to implement? There are a few things that come to mind:
1. Infrastructure - I have a high-speed DSL line coming into the home - to my PC. I don't watch movies on my PC, I watch them on my TV. How will the movie get from my PC to my TV (or to my set-top box or my Tivo)?
Yes, I can list a bunch of ideas that will make this possible (I would like a wireless connection between my set-top-box/Tivo and my PC), but the fact of the matter is that if Netflix offered the service today, I couldn't use it. And if they required me to buy a few hundred dollars of new equipment, I am not sure I would, which would be true of most the customer base. So from an infrastructure point of view, there is a serious problem to contend with until high-speed access to the TV (direct, through Tivo, or through the set-top-box) is commonplace.
2. Doesn't Own a Critical Piece of the Puzzle - As the article points out, there are several companies looking at this very obvious business model. So if a bunch of companies are going to offer this, who will be the winner?
Netflix's advantage is their customer base, plus the fact that these customers order and manage their account over the internet. Great. But is that enough to win in this business model when there are other critical pieces:Content (Movies) - There are going to be serious copyright issues once movies start being digitally flung over the internet (look at music as an example). As noted in the article, most of the movie houses are starting or backing competing services for internet delivery, which will put Netflix at a disadvantage.3. A Ready Business Model - When did you first hear promises about video on demand? I heard this being talked about in the mid 90s and there were at least a dozen attempts by cable companies and start-ups to provide this service on some limited bases. And they all failed.
Equipment - As noted in point one, there needs to be a way to get the movie from the internet to your TV, probably through the set-top box with DVR (the movie would be uploaded onto the DVR/Tivo disk and be ready for viewing). And who provides the vast majority of set-top boxes to consumers? The cable companies! Think they would like to provide internet movie delivery? You wanna bet they are working on it already as a part of the cable package? Satellite service is a little different, but you can bet Rupert's boys are also working on this. If the equipment is provided gratis to customers and the feature as a part of the existing satellite or cable bill, it will be tough for Netflix to displace.
There is a connection between Tivo and Netflix since the Tivo pres is on the Netflix board, but I am not sure this will be enough to overcome the set-top box/cable cabal, which Tivo themselves seem to be leaning towards.
Capital - Netflix is public with a very high riding stock. But they will be entering this market against people with much deeper pockets (as noted in the article).
Video on demand is the same as video rental if the selection is wide enough, is cheap, and if delivery is easy. But no one has made all three possible yet (if you have pay-per-view and Tivo, you have cheap, easy delivery and can watch when you want, but you have a selection problem). Sort of like video phones, it's one of those technologies that consumers want and companies want to provide, but technology bottlenecks have made both services out of reach for the mass market. Faster internet connections and better technology should make both possible in the coming few years, so the trick is to roll it out when it is ready instead of promising big and not being able to deliver.