True. The pricing does seem a little off though compared to Netflix. The breakeven point there is like 3 movies per month. Thats not a lot...
Netflix streaming has a poor selection of movies. Netflix dvd in mail is great but there are days of delay in mailing them back and forth.
Netflix is like an all you can eat buffet and this lionsgate is like a streak house. You wouldn't tell the steakhouse that thier food is overpriced because the golden coral sells all you eat for 7.99.
It think in practice it will. I don't think that difference in type VoD vs streaming library is as well defined in most people's minds as it is in yours. Same for attaching (much) more value to the one per movie as you do.
You're not wrong about the steak thing, but cheap price plus "unlimited" goes very far in practice I think. And in fact has judging by Netflix performance
EDIT: Just browsed through my watchlist on Instant Video, and most of the titles on it are available for rental at GBP 3.49 or 4.49, but quite a few are not available to rent at all, and have purchase prices ranging from around 5 to 15 pounds. I'm going to assume that Amazon knows what pricing works for them, at least in aggregate.
In which case you're an outlier and frankly entirely uninteresting as a customer to all these companies from a commercial poverty anyway.