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Netflix insists that the physical format will be around for a long time.

Did Internet kill the video star?

“The goal for Netflix is to be ubiquitous on any device that gets you to the television,” remarks Steve Swasey, “Including the television.”

The company scored a major coup last month, when Netflix announced that it had paired with Sony to deliver a streaming media solution for the PlayStation 3. And while not an embedded solution like the Xbox 360 (although Swasey insists such a solution will be released late next year), Netflix has managed to leverage BD-Live technology via a Blu-ray disc to deliver streaming video to PS3 owners.

While Swasey declined to comment on the number of PlayStation 3 owners that have applied for the streaming media discs, online reports state that as many as 100,000 were sent out in the first week alone.

The numbers are staggering, and immediately set off alarms that Sony was shooting itself in the foot. Is there a case to be made the Blu-ray Disc Association is inadvertently cannibalizing its own sales by supporting streaming HD content, as provided by Netflix?

“I think they’re very different usage models,” says BDA’s Andy Parsons, “I think people who are watching Netflix are probably watching content they’d most likely rent anyway.”

“You can watch a movie on Netflix, but you don’t really own the movie – you’re watching it on a temporary usage basis. Whereas if you buy it on Blu-ray, you’re buying an archival quality of the movie, you’re buying the very best possible picture quality you can get, and you’re buying it so you can watch it when ever you want.”

“So I think they’re really complimentary, and not in competition with each other.”

Parsons is also quick to note that while consumers purchase Blu-ray discs to watch the actual movie, both the quality of the film and its supplemental material separate the physical format from online services.

“Everybody buys a movie to watch a movie, first and foremost, but I think Blu-ray does offer a lot more above and beyond that when you talk about comparing it with other ways to watch movies.”

“For example, the audio on Blu-ray is uncompressed audio, whether its PCM or a lossless codec. And also we have a lot more interactivity on the disc – relative to things like Picture-in-Picture and BD Live. So I think those are ways of immersing the viewer in the experience much more than they could than if they were watching a cable broadcast or even video-on-demand.”

“Not to mention, we simply have better quality. We only have one channel to worry about – we’ve got up to 48/Mbps to deliver the best audio and video. Pretty much any other format isn’t going to have that luxury. We’re talking about archival quality.”

There has been no data, other than an index of unsubstantiated Internet fears, that Netflix has deterred Blu-ray sales growth or had any kind of negative impact.

On the contrary, recent data actually supports Netflix’s notion that Blu-ray manufacturer support is actually helping the industry.

Home Media Magazine reported earlier this month that with the inclusion of streaming Netflix support (in addition to similar services), brand name players from Insignia, Sony, Samsung, LG and others are on pace to replace rival settop boxes.

Competing solutions from Roku and Boxee, according the data, could be outdated and displaced by Blu-ray players as early as 2014.

“People are loving the streaming functionality, whether it is on the laptop or television-ready device,” Netflix’s Swasey tells us, “It’s a terrific value to electronics manufacturers, as it is a terrific value for our customers.”

“Getting people comfortable with streaming, watching instantly on a PC or on a TV, these are all things consistent with changing consuming behavior. Here is a company, that a decade ago, changed consumer behavior in regards to how people watch movies, and it is doing it again with streaming functionality. Anything that supports that is good for the [industry].”

And while Swasey makes no secret about Netflix’s designs to be the leading streaming content provider of movies as the company moves into the future, he also states it won’t be displacing Blu-ray anytime soon.

“The good news for people that like the physical disc is that it’s going to be around for a long time. We’re going to be shipping DVDs until 2030 and Blu-ray is the next extension of that, of course.”

So don’t sell your Blu-ray collection just yet, because the party has just begun.

Editor’s Note: We would like to thank both Steve Swasey of Netflix and Andy Parsons of the Blu-ray Disc Association for speaking with us, and contributing to this article.