The bugs seem mostly ironed out, and you do get a glimpse of home video’s future via its user-friendly menus and features. We’re seeing more high definition movies via the stream, which look pretty good on a big-screen.

The biggest problem, which Netflix has been scrambling to address, is its limited catalog. The hits are in short supply and everything feels, well, used.

Looks like a partial fix is on its way. Netflix just confirmed an online streaming deal with the three Hollywood studios that own the little-known pay TV channel Epix.

That brings Netflix subscribers Epix movies from Paramount, MGM and Lionsgate to Netflix, beginning Sept. 1.

You won’t be able to “watch instantly” — there’s a 90-day window after the films’ debut on premium TV and on-demand subscription services — but the move clearly means a quantum leap in Netflix’s online offerings. (Watch Instantly is three steps down the distribution channel.)

It’s not clear how many recent boxoffice hits will be flowing through the channel. Epix movies of the moment include “Iron Man,” the latest “Star Trek,” “The Cove,” “G.I. Joe” and “Crank” — almost all more than a year old.

Catalog titles include the “Godfather” trilogy, “Blood Simple,” “Star Trek” movies, “Dances With Wolves” and “Last Tango in Paris.” That the cream of the archives, however: Anyone for “976-Horror 2″?

Epix immediately becomes profitable with the deal, studio executives pointed out. Good thing, since its current distribution is approximately squat.

Netflix’s stock picked up even more speed with the news, posting a 7 percent gain on announcement day.

The deal runs for five years and is worth as much as $1 billion, the Los Angeles Times and Reuters said.

Netflix outputs its streaming content to computers, game consoles such as the Xbox 360 and to various consumer electronics devices such as Blu-ray players.

“Adding Epix to our growing library of streaming content, as the exclusive Internet-only distributor of this great content, marks the continued emergence of (Watch Instantly),” said Ted Sarandos, chief content officer for Netflix.

The DVD rental giant recently pacted with Warners for rights to show “Nip/Tuck,” “Veronica Mars” and various catalog TV shows.

Its month-old deal for guy-oriented Relativity Media films (”Robin Hood,” “Get Him to the Greek”) allows for streaming during the “pay TV window.” Netflix said this would mark “the first time that studio quality theatrical feature films will be streamed via subscription by Netflix instead of being broadcast by the traditional pay providers.”

Other distributors announced as part of the Watch Instantly expansion into the indie arena include Gravitas Ventures, Music Box Films, Oscilloscope Laboratories and Regent Releasing.

“We’ve found that a large number of members enjoy the innovative, artist-driven nature of independent film,” press-released Robert Kyncl, vice president of content acquisition for Netflix.

Much of the Watch Instantly fare that’s classified as independent fare is of mixed value, a lot of aging B-movie crap. The new indie film deals are designed to bring in higher-quality films, such as “Au Revoir Les Enfants,” “Departures,” “As It Is in Heaven” and “A Nos Amours.”

Criterion’s online video service began more than a year ago, serving up titles such as “La Strada,” “Grey Gardens,” “Monterey Pop” and “M.” It’s not clear how many of those titles will be available via Netflix, since the Tiffany DVD label charges for those films on its site.

On Criterion’s “Online Cinematheque” site, the movies go for $5, but they’re renting for $3 on Vudu, another online video service that recently cut a deal with the DVD distributor.

Pretty much everything released by the Criterion Collection is worth watching and owning, but so far the streaming movies contain only a few of the label’s greatest films.

The Netflix deal with Microsoft (Xbox) simply expired.

Not much to get excited about, really. As we’ve written before, the Watch Instantly is underwhelming, a lot of average to low-grade movies that are generally available any night on free TV.

On the Xbox 360, the two-step process to get the film streaming into your game console was a clunky pain, and once there the images looked borderline crappy.

This part is getting even worse on PS3, for now. In order to get the service, PS3 users have to insert a Netflix-supplied Blu-ray disc into their players, which also have to be connected to the Internet. A software update apparently will fix this later.

Also in line for the service, apparently, are owners of Nintendo’s Wii system. Tech blogger Dan Rayburn says he’s been leaked photos of the Wii-Netflix service, which could come this year.

Meanwhile, in other lame-tech news, Apple TV has been upgraded to 3.0 software. The changes mostly allow for more features from the iTunes Store such as the LP multimedia packages. No support for outside content, such as the Netflix package.

Macworld called the Apple TV 3.0 update “a pleasant improvement that addresses some lingering interface issues while adding whole new levels of mystery about exactly what (if anything) Apple is going to do with the product.”

Update: Apparently the Apple TV 3.0 update wasn’t an entirely pleasant experience for end users. Let’s hear it directly from Apple:

There is an issue with Apple TV software version 3.0 that can possibly cause your content to disappear after a period of time. All customers running Apple TV software version 3.0 should immediately restart their Apple TV and then upgrade to Apple TV software version 3.0.1.

Yes, that’s disappearing content.

After the botched iPhone 3G update … and the iTunes update that resulted in mysteriously AWOL library MP3 … you’d think they would be more careful. Someone should make a TV ad about this.

Only catch is, users have to be running Windows Vista Home Premium or Ultimate. You basic Vista won’t cut it … another reason to regret that operating system. Also out in the cold are the XP diehards and downgraders.

Netflix and Microsoft previously partnered on Xbox 360 delivery of “Watch Instantly” streams, available to the game console’s Live Gold subscribers.

“We’re building on our broader vision to alleviate the need to jump from Web site to Web site to find TV shows, movies, sports and news,” Microsoft said in today’s freshly cooked canned statement. “With Windows Media Center, (viewers) can now find it in one place.”

The Windows Media Center elite must also have a basic or better subscription to Netflix. The streaming catalog of 12,000-some (mostly dated) movies and TV shows comes at no additional cost. Microsoft’s Silverlight video platform will do the heavy lifting.

Home Premium runs about $60 more than Basic, while Ultimate adds another $120 or so to the tab. Microsoft, meanwhile, is ready to trash Vista with a highly anticipated OS, Windows 7.

WMC added a sports channel in March with content from CBS and Fox.

Update: Silicon Valley Insider looks at the Netflix deal from the Apple perspective. The post notes that “Netflix support makes the Xbox 360 a more attractive movie machine than Apple’s sad Apple TV. … And it makes Windows Media Center more attractive than Apple’s “Front Row media center software.” The dagger gets slipped in thusly: “Apple admits its home entertainment business is a ‘hobby.’ But right now, maybe ‘joke’ is a better word.

Meanwhile, live streaming site Mogulus has redubbed itself Livestream, reflecting its function rather than, uh, some futuristic executive whose bit was left on the cutting room floor in “The Matrix.”

Max Haot, Livestream CEO and co-founder, lets slip this bit of promo-talk:

Livestream is doing for live video streaming what YouTube did for on-demand video clips. While we didn’t invent live streaming, we’re removing the barriers — making live video production and streaming easy and affordable for anybody to use and experience. … Live video streaming is well positioned to become a key force moving us toward richer, more immersive content experiences and communication.”

The mail-rental giant asked subscribers about their interest in online versions of current HBO series such as “Big Love” and “Flight of the Concords,” as well as oldie goldies “The Sopranos,” “Six Feet Under” and “The Wire.” And a bunch of movies showing their age.

Netflix’s Watch Instantly streaming service comes with a regular subscription. It features mostly catalog movies and indie fare but has a solid 12,000 or so movies on tap.

The poll cited “HBO content,” not specific channels. There are seven.

Netflix has been moving aggressively into the broadband streaming video business, finding hardware outlets recently on the Xbox 360, Tivo, and Blu-ray boxes from LG and Samsung. The HBO fare would be available via those channels, as well as on PCs.

$10? (Well, make it $9.99.) Sounds like a non-starter. If you get the Time Warner premium service via cable or satellite, who needs it? And $10 will get you most of the way to paying for the cable tier, anyway. The value to such a service may be in exploring older HBO series such as “Rome,” maybe.

“Big Love” looks surprisingly strong this season, but for the most part HBO’s glory days have come and gone. I’m thinking the price point for HBO streaming video via Netflix is something like $5 a month (make that $4.99). Even though HBO fare goes for $1.99 an episode on iTunes. Remember, Watch Instantly is free … of additional charge.

Hacking Netflix broke the story. Video Business quoted a Netflix flack as saying hundreds of similar polls are emailed out each month, and that there were no talks with HBO anyway.

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Hastings credited Netflix’s movie-streaming service Watch Instantly with the flashy numbers, which handily beat the Street. For the online video industry, this is a big deal.

The news that online video service already is impacting the mail-rental giant’s bottom line is startling and exciting. No doubt the story is being closely tracked in the Hollywood studios and at the networks.

Netflix has been aggressively promoting its streaming videos and lining up hardware partners, especially in recent months. Hastings said 2008’s “substantial” investment in online video content will be surpassed in 2009.

There was no indication he would be adding current hit movies to Watch Instantly, however.

(Read the Netflix earnings report.)

To use Watch Instantly you have to be a Netflix DVD rental subscriber, which was likely a factor in the company’s report that it brought in more subscribers at a lower acquisition cost. (Cablers can only dream … ) Total subscribers are about to surpass 10 million.

Hastings said he saw evidence that Watch Instantly users were renting fewer DVDs. “Time will tell whether this substitution effect is an attribute of early adopters or a mainstream behavior.” He said Netflix was in talks with “nearly every (consumer electronics) manufacturer” regarding Blu-rays and online television.

Netflix stock shot up 15% on Tuesday’s news, and added another 4% Wednesday amid a strong market rally.

“We plan to spend as much money as we can with the studios, licensing as much content as we can — we are already one of the studios’ largest Internet revenue sources,” Hastings said. “Our spending is limited only by what content is available at reasonable costs.”

Netflix has been busily cutting carriage deals for its streaming video service, now standard on some Blu-ray players from LG and Samsung. LG plans “broadband TVs” with Netflix inside. The recently redesigned Xbox 360 Marketplace offers Watch Instantly, and lone wolves can buy a black box, from Roku, that picks up only that signal. TiVo started carrying the Netflix online video stream late last year.

Meanwhile, over at set-top box maker Vudu, 15% of workers were laid off. That leaves about 50 staffers. A spokesman said most of those shown the door were temp workers.

Disclosure: I’m a Netflix stockholder, feeling better about things now. The company’s affiliate ads run on this blog.

Promo:

Heavy into Netflix? Check out our sister site DVD Spin Doctor for new and classic movie reviews.

LG continues to cut innovative deals with movie and TV content distributors, this time routing Netflix’s streaming video service through new LCD and plasma HDTV models to be introduced at this week’s Consumer Electronics Show in Vegas.

The “Broadband HDTVs” are expected in market this spring. Streaming video will come straight into the HDTVs. Local broadband issues would be expected to affect quality as with any outboard Internet video device.

Netflix and LG already have partnered on a set-top box and the network BD300 Blu-ray player. LG said five of its upcoming Blu-ray players and home theater set-ups would include Netflix’s streaming service, called Watch Instantly.

“LG Electronics was first to embrace Netflix as a streaming partner a year ago, and was first in 2008 to introduce a Blu-ray disc player that streams movies from Netflix,” said the mail-rental giant’s chieftain Reed Hastings. “So it’s fitting that LG is the first to introduce Netflix instant streaming directly to the TV with these next-generation HDTVs.”

For Netflix, the move continues its evolution away from the famous red mailer envelopes containing rental DVD discs. Hastings, credited as an early visionary of e-commerce, has long said broadband delivery would be the future for his company. (For this reason, I remain a cautiously optimistic shareholder in Netflix.)

LG has been aggressively trying to set its consumer electronics products apart from the big-box crowd with content-driven deals. A week ago, the Korean manufacturer announced online video deals for its Blu-ray players with online PPV provider CinemaNow and user-generated video homebase YouTube.

Testing will begin immediately. TiVo customers with HD-ready set-top boxes will have the streaming movies service by the end of the year, the New York Times reported. An eligible subscription to Netflix is required.

The Watch Instantly service will not be available to those using DirecTV boxes with TiVo.

Netflix has been on the move with its online video service, as slowdowns in its traditional mail rentals have battered the company’s bottom line.

Netflix just announced availability of its streaming movies and TV shows to Mac (Intel) users, as well as to owners of some new Samsung Blu-ray machines.

Recent content deals include partnerships with Starz Entertainment, CBS and Disney. A lot of the films offered on Watch Instantly are catalog titles and indie fare.

Meanwhile, the Mac community founded more reasons to hate Microsoft when its Silverlight media player became the “official” Olympics online media delivery system, leaving Apple users to the leftovers on broadcast TV.

Here comes a break in the case: Silverlight now is streaming Watch Instantly movies to Macs — assuming they’re the newer-generation Intel-based machines. This move comes courtesy of  the recent release of Silverlight 2 and Play Ready DRM, a digital rights management technology that allows the app to protect copyrighted content on any browser.

Mac users, of course, aren’t entirely thrilled because they would be downloading a Microsoft plug-in onto their computers. A non-Apple DRM with unknown potential issues isn’t exactly welcome, either.

Still, somewhere between here and the end of the year, Netflix expects to deliver its streaming content to subscribers with the Intel Macs. Some subscribers reportedly have the upgrade now. Both Safari and Firefox browsers can handle the job.

Netflix’s product unit chief Neil Hunt provided this bit of canned quotery in the Watch Instantly press release:

“Silverlight with Play Ready offers a powerful and secure toolkit for delivery of dynamic streaming, which offers faster start-up, and higher quality video, adapted in real time to users’ connection speeds, Members who enjoy watching movies and TV episodes … that can be instantly streamed at Netflix will be thrilled with this next generation improvement of access and quality, on a broader range of platforms, including Intel Macs and Firefox.”

Meanwhile, Samung agreed to provide Netflix movie streaming via some of its recent players, the BD-P2500 and P2550. Terrific. Now if Samsung can just get its players such as the notorious BD-P1200 to play major studio Blu-rays. Like, say, the highly anticipated new James Bond releases like “Dr. No.”

This means delivery options for Watch Instantly include some LG Blu-ray players, the Roku black box and, coming soon, the new Xbox 360 media delivery system.

Update: Jason Snell of Macworld.com reviews the Watch Instantly stream on a Mac, noting that the quality and quantity of the movies and TV shows has improved since the Starz deal. “Still, where Instant Watching shines is in its collection of documentaries, classic movies, and TV series.”

Also, Dan Frommer of Silicon Alley Insider weighed in. Bottom line: “The movie and TV streaming service from Netflix is “a good start and worth checking out if you’re a Netflix subscriber with a Mac.”

The newish content comes via licensing deals with Starz Entertainment, CBS and Disney.

New titles available under the Starz (Liberty Media) deal include “No Country for Old Men,” “Superbad,” “The Orphanage” and “Spider-Man 3″ — all well through their distribution cycles, but not bad for “free” — as in, no additional charge.

Watch Instantly streams movies and TV shows to Netflix customers with a regular DVD-rental subscription. Non-subscribers also can sign up for a Starz-only stream at $7.99.

Watch on a Windows PC or spring for a $100 Netflix box from Roku that brings the content to your TV via an Internet connection. Xbox 360 users with a Live Gold account will be able to access the stream via the game system’s redesigned multimedia interface. (Microsoft just dropped Xbox prices — do the math.)

Netflix said the long overdue Mac video streaming is coming “by the end of the year.”

Watch Instantly users apparently will get upcoming films at the same time as pay-cable viewers.

The Starz Play package does not include high-definition video. Starz’s chief flack told TV Week that there wasn’t sufficient consumer interest in online HD to make it worth worrying about.

The Starz deal already has delivered about 1,000 films to Watch Instantly, with another 1,500 in the wings.

Late last month, Disney and Netflix hooked up for TV fare such as “Hannah Montana.” Starz has a deal with Disney, so the Mouse House’s feature films will come to Netflix streams via that route.