Netflix LogoNetflix Inc (NFLX.O), posted a strong profit at 37 cents per share but it was less than analysts had been hoping for. Netflix is growing at a phenomenal pace quickly outstripping its competitors like Blockbuster. But growing competition from DVD rental kiosks kept them from reaching some higher targets that they were stretching toward.

On the call with analysts, CEO Reed Hastings stated that the rise of stand-alone kiosks offering $1 DVD rentals was notable. “In exit surveys of canceling Netflix subscribers, kiosk is more and more frequently named as where they will go now for movies,” he said. “By the end of the year, kiosks will likely be our number one competitor as video stores fall inversely,” he said, adding the “long-term effects of ubiquitous $1 new release DVD rental are not positive for us or the industry as a whole.”

When asked what they planned to do regarding the kiosks, Hastings said, “We have to focus on our differentiators, such as selection, convenience and the value of unlimited streaming. We’ll focus on our benefits and they’ll focus on theirs.”

As a Netflix customer myself I can see that they are pushing very heavily toward Internet Delivery. The challenge will be to have the selection of the right movies at the right time. And right now, they are unable to bring Internet Delivery of New Release movies. However, if you are like me and don’t watch live TV anymore then it works great for watching TV episodes pretty much commercial free.

What are your thoughts?