Netflix Oughta Be in Pictures

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So that's what the "Buy Movies" tab on my Netflix (Nasdaq: NFLX) landing page was all about. After reading Monday's commentary by Marko Djuranovic on the DVD rental specialist's new move to sell some of its previously viewed discs, I was more than a little intrigued.

After digging a little deeper and talking to the company, Marko walked away feeling that investors should "all but ignore" the new initiative. While it's a creative way to ditch excess inventory, he believes it's not likely to materially contribute to the company's financials.

Marko and I usually see eye-to-eye on Netflix. We're both shareholders. We both actively follow the company and enjoy writing about Reed Hastings' creation. But this time, I have to disagree with my fellow Fool -- I think this move will be a very important contributor for Netflix.

For starters, Netflix is taking this seriously. It's not just devoting real estate to the tab on the top of every page; the company is quickly morphing this offering into a real contender. When Marko was checking out the offering last week, the films were priced at $10.99. Last night, I saw the flicks for $9.99. While Marko found a mostly crummy selection of titles, I was treated to top-selling DVDs like Pixar's (Nasdaq: PIXR) The Incredibles and DreamWorks Animation's (NYSE: DWA) Shark Tale.

Each disc comes with a DVD case -- notice that it's not the original case -- but with the original artwork. Logistically, it makes the entire process easier and practically indistinguishable to the end user. Shipping is free.

You do realize Netflix's true target here, don't you? It's not Blockbuster (NYSE: BBI), though the offline giant has been hawking its excess titles for years. It's Amazon.com (Nasdaq: AMZN). Let's see. Amazon is selling new copies of The Incredibles for $17.99. But Amazon also serves as an intermediary for third-party merchants through its dynamic storefront. There, you can find a used copy for as little as $9.98. Is Netflix overpriced? Not at all. Tack on standard shipping, and the cheapest Amazon used offering is $12.47. The Netflix version is 20% cheaper and likely to get to you sooner.

With Amazon threatening to launch its own online rental store, this is Netflix drawing a line in the sand -- with a jackhammer.

Forget that Netflix needs to do this anyway. When Netflix subscriber counts were doubling or tripling every year, it didn't really have to worry about over-ordering new releases. The spurt in new members would still make those discs attractive catalog offerings to a wider audience as time passed, above and beyond the occasional lost or damaged disc. Netflix is still growing quickly, with subscribers up 56% over the past year. However, with 3 million current subscribers, those growth numbers will probably continue to slow in the future. The company is right to rely on its customer base as an easy outlet for unneeded discs.

This isn't just efficient of Netflix -- it's clever. Netflix has the distribution centers. It has the client base. It has their clients' credit card information stored away. Why not take a jab at Amazon on the retailing side? This could be Netflix's first step beyond mere rentals, toward becoming a bona fide distribution outlet for third-party wares. I like it. Man, I like it a whole lot.

Netflix is no slouch. Its stock has nearly doubled since bottoming out three months ago. Bring it on, Amazon. Bring it on.

Other headlines that come in red mailers:

• Yes, Netflix really is selling some of its previously viewed discs.
• It's all a part of the company's realization that it needs to think about tomorrow.

You can also talk shop with your fellow Fools in our Netflix discussion board.

Netflix and Amazon prepare to fight, with Pixar DVDs as ammunition -- and your portfolio wins. The potential rental rivals and the animation upstart are Motley Fool Stock Advisor picks. For more superstar stocks from Tom and David Gardner, sign up today for a 30-day free trial subscription.

Longtime Fool contributor Rick Munarriz has been a Netflix subscriber -- and investor -- since 2002. He also owns shares in Pixar. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.