Netflix sees the future, and it's digital

With the hiring last year of Anthony Wood, founder of ReplayTV and Roku, Hastings reinforced his intent to deliver video straight into the living room. Originally, Netflix had plans to build its own boxes a la TiVo, Vudu or Apple TV, but Wood convinced the company that it could get wider distribution if it embedded its software in set-top boxes and gaming consoles.

This was very smart. By not trying to get the whole pie, they're getting a smaller piece of a much bigger pie.

"It's a good strategic move," said Andy Hargreaves, an analyst with Pacific Crest Securities. "Netflix sees the world will go digital, no matter what they do. They realize there is more to be lost by waiting than doing it early."

The last line is crucial. Too bad other businesses don't understand this.