Netflix is set to launch its online TV and movies subscription service in the UK and Ireland early next year, putting it head to head with Tesco, Amazon.com and Google's YouTube as well as new start-ups such as Vdio.
The companies are all betting that greater numbers of consumers will choose to watch film and television on-demand through internet-connected games consoles, set-top boxes and smart TVs, rather than the U.K.'s traditional satellite and cable providers, British Sky Broadcasting and Virgin Media, who are also providing online streaming services.
In September, U.S.-based Netflix opened up for business in 43 countries in Latin America and the Caribbean and it is widely expected to expand into other European markets such as Spain in the coming months.
But in the U.S., Netflix's largest market, where it offers both DVDs by post and online rentals, the company has struggled with customer losses after a recent price hike.
Shares in Netflix have fallen by more than 60 per cent since their peak in mid-July, after a rapid rise in the previous two years.
The company will publish its third-quarter results later on Monday, when embattled chief executive Reed Hastings is also expected to provide further details on its strategic U-turn earlier this month, when it ditched plans to split its DVD and online streaming businesses.
Netflix's decision to enter the U.K. market comes amid intensifying competition, following the acquisitions of Lovefilm by Amazon and Blinkbox by Tesco earlier this year.
Google has also redoubled its efforts to bring top-tier films to its YouTube site on a pay-per-view basis.
This month has also seen reports that Janus Friis, a Skype co-founder, is launching Vdio, a new online video service in the U.K. that would plug into Facebook's new media-sharing capabilities.
Vdio's launch, if it can secure the rights from movie studios and broadcasters, would come two years after Mr. Friis and his Skype collaborator, Niklas Zennstrom, were forced to abandon Joost, a previous online video service with a substantial social networking component.
Netflix has not announced its content line-up or pricing for the U.K., but has invited potential customers to register their details with the site.
Two factors could change the shape of the British online video market substantially in the near future, giving new entrants such as Netflix a greater opportunity to acquire and distribute films over the internet.
The first is the 2012 launch of YouView, an internet-TV joint venture between broadcasters the BBC, ITV, Channels 4 and 5, with broadband and infrastructure providers TalkTalk, BT and Arqiva. YouView's partners hope that its £200 set-top boxes will transform the TV market in the same way that Freeview did by bringing low-cost digital broadcasts when it launched in 2002, by providing a new platform for internet video providers, potentially including Lovefilm or Netflix.
Secondly, online providers may soon be able to acquire the rights to the latest Hollywood blockbusters more easily. The Competition Commission is considering how to loosen Sky Movies' grip on top-tier movies after the authority's provisional ruling in August found that BSkyB's market power "affects adversely competition between pay-TV retailers".