Netflix (NYSE: NFLX) is the world's largest online DVD movie rental service. It promises to eliminate the hassle involved in renting movies, and if you're busy like I am, this could be the perfect arrangement. The question is--should you invest in it?

1. Netflix hit the one million customer mark even faster than industry giant AOL, adding nearly a million customers and 15,000 titles in 2005.
2. Netflix has great customer service, and was rated the number one website for customer satisfaction in a survey by ForeSee Results and FGI Research. Fast Company magazine also recently awarded Netflix its annual "Customers First Award."
3. The stock reached a two-year low in November 2004 after a lawsuit, but shows resiliency having almost completely recovered in the year since.
4. Revenue for the third quarter of 2005 saw a record 23 percent year-over-year growth from the third quarter of 2004.
5. In May 2005, Wal-Mart announced an agreement with Netflix to market movie services on their respective websites.

1. Blockbuster Inc. (NYSE: BBI) recently announced additions to Blockbuster Online with incentives to get Netflix customers to switch services.
2. Netflix could be sensitive to a market shift. I wonder if Netflix will be able to adapt if DVDs become obsolete.
3. The company was sued on September 23, 2004 for breaching its contract to provide "unlimited DVD rentals for a flat monthly fee... via one-day delivery."
4. With a decline in the purchase cost of a DVD, consumers may decide that it's just as cost-efficient to buy the movie as to rent it, leaving Netflix behind.
5. Netflix won't become a permanent fixture if subscribers get bored with the novelty; they will go back to picking up movies when they pass the video store on the way home.

A revolutionary in the movie rental industry, Netflix is now a widely recognized Internet brand. However, competitors are catching up--can Netflix stay ahead long enough to make an investment worthwhile?

1. Netflix has revolutionized the way we rent movies. In my eyes, they have the best product on the Internet and I've been happy with their service.
2. They send DVDs right to your door and you can send them back at your convenience. They have a simple business model and their speed in executing orders is terrific.
3. Customer base has been growing tremendously fast. At the close of 2005, Netflix had an estimated 4 million customers.
4. The company has a cult-like following, and is quickly becoming one of the leading brand names on the Internet.
5. High gas prices and lazy consumers are two huge advantages to Netflix. When your DVDs arrive in the mail, how can you possibly go back to a conventional rental store?

1. Blockbuster is an 800-pound gorilla looking to take market share away by luring customers to their online service. Amazon.com is also a potential competitor.
2. If Bill Gates is right, DVDs will become obsolete as consumers simply download movies from their computers to their TVs. Video on Demand anyone?
3. Gross margins are dropping because they are spending more money on attaining customers. Currently at 43.2 percent, Netflix is still sharply lower than the 49.5 percent a year ago.
4. To date, 8.4 million people have been trial members, but the company has yielded only 3.6 million subscribers. That translates to the low hit rate of approximately 43 percent.
5. The stock has tripled in a year and it seems that investors have gotten too excited as of late.

Editor's Note: At the time of article submission by the writers, Netflix stock closed at $29.95 per share. By the time this issue went to press on January 12th, the stock was trading at $25.72.