Actually I think it might work the other way. At the moment Netflix can't get licenses to stream the vast majority of movies. But if this business model works

Actually I think it might work the other way. At the moment Netflix can't get licenses to stream the vast majority of movies. But if this business model works and is legal then Netflix can say "Hey look, your fancy new movie is going to get streamed over the internet anyway, you might as well license it to us". I imagine the studios make more money on average getting fifteen cents per watch from Netflix than selling a physical DVD to these other guys and letting them play it until it wears out. So this business might encourage a shift that works out to everybody's advantage: the consumer, the studios, and the existing dominant player Netflix. Everybody's advantage, that is, except for this guy, who finds himself driven out of business as soon as Netflix starts streaming every title in their library.