Take that, Netflix (NASDAQ:NFLX)!

Blockbuster (NYSE:BBI) is teaming up with Deutsche Telekom's (NYSE:DT) T-Mobile to offer Blockbuster On Demand through smartphones when HTC's HD2 hits the market next month.

The built-in application will allow HD2 owners to buy or rent from Blockbuster's digital library directly through their handsets. A Wi-Fi connection is required for the initial download, but multiscreen capabilities will allow rentals and purchases to seamlessly continue from one enabled device to another.

The jury is still out on folks wanting to stream full-length features through their smartphones. This will be a good trial balloon. The only thing we do know is that Netflix isn't exactly wowed by smartphone streaming.

Even Apple's (NASDAQ:AAPL) iPad isn't big enough for Netflix. CEO Reed Hastings downplayed the urgency to stream through the iPad or iPhone during its latest quarterly conference call.

"It's not a huge priority for us because we are so focused on the larger screen," Hastings told analysts. "It's something we will get around to, but it is not in the near-term."

Expect Hastings' tune to change if Blockbuster On Demand gains traction. Even if Netflix offers a unique smorgasbord service -- at a time when Apple, Amazon.com (NASDAQ:AMZN), and Blockbuster are moving digital flicks piecemeal -- if consumers begin streaming movies on their iPhones and Palm (NASDAQ:PALM) smartphones, Netflix will have to redefine its "near-term" strategy to dismiss portable wireless gadgetry.

It's one thing to tell subscribers that they have to wait 28 days before renting Time Warner (NYSE:TWX) DVD releases. It's another thing entirely to tell them that they don't care about streaming through iPad and smartphone gadgets -- when clearly, customers are about to do exactly that.

When will Netflix streaming be available for smartphones? Share your thoughts in the comment box below.

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