In an interview with John Byrne, BusinessWeek.com’s executive editor/editor-in-chief, Netflix (NFLX) CEO Reed Hastings conceded that his business faces similar troubles to what magazines are up against, as the use of broadband video is set to rise. For now, though, the DVD rental business is still growing and he’s content to pursue the streaming business down the road. Since this was during the luncheon session at the Magazine Publishers of America’s Innovation Summit, Byrne asked if Hastings reads any magazines.

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Piper Jaffray analyst Michael Olson today launched coverage of Coinstar (CSTR) with an Overweight rating and $38 price target. The parent of the Redbox video kiosk chain closed yesterday at $31.96.

Olson sees several trends working in the company’s favor:

• DVD rental kiosk market is gaining share from traditional retailers like Blockbuster.
• Internet delivery likely still 3-5 years from going mainstream.
• Consumers shifting to DVD rentals from purchases due to low fees from Redbox – $1-a-day.

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A recent shift in merchandising strategy by the world’s largest retailer spells more trouble for DVD sales and the entertainment industry that depends on them for profits.

As part of a larger effort to clean up its aisles and appeal to higher-end shoppers, Wal-Mart Stores Inc. (WMT) is doing away with display cases to promote the latest hot movie titles.

The move comes as major film studios are reeling from declines in revenue from DVD sales as cash-strapped consumers turn to low-cost rental services and digital downloads for home movies.

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Google Inc.’s (GOOG) YouTube is in discussions with major movie studios about allowing users to stream movies on a rental basis, according to people familiar with the company’s plans, marking one of the video giant’s first moves towards charging for content instead of making it available for free with advertising.

While some studios already make full-length movies available on YouTube, they tend to be older, lesser-known titles. Now YouTube is talking to Lions Gate Entertainment Corp., Sony Corp. (SNE) and Warner Bros. about integrating newer titles into the existing YouTube site, most of which it would carry a rental charge. In some cases, these titles might be available on the site on the same day that they come out on DVD. It is unclear to what extent older movies or television shows will be part of the new agreements.

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Blu-Ray drives have yet to make a dent in the PC business. In 2009, according to research firm iSuppli, just 3.6 percent of all PC systems will include Blu-Ray drives. In 2013, iSuppli predicts, the total will still be a rather modest 16.3 percent.

So the obvious question is, what happened?

Two reasons, according to iSuppli. One, cost. Conventional DVD drives are simply a lot cheaper. “Given the high price of the product, consumers are unwilling to pay the extra money in order to obtain a high-definition drive,” asserts iSuppli senior analyst Michael Yang.

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The Netflix (NFLX) warehouse in Carol Stream does not appear on any map. Your odds of finding it are slightly better than your odds of stumbling upon a rare insect in a field of weeds. One could drive to Carol Stream, stop in a random office park, climb from one’s car and scream, “Reveal thyself, Netflix!” This is not advisable. But the temptation remains.

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“Boring! Can we fast-forward?” my daughter asks as Joan Baez warbles “Joe Hill” at Woodstock. We are “sharing” the newly released 40th Anniversary DVD of the Woodstock documentary, but she is doing here what she also does when we run my iPod through the car stereo.

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RealNetworks (RNWK) is upping the ante in litigation seeking to prevent it from distributing DVD-copying software. The company argues the Hollywood studios are a “price-fixing cartel” that have no right to prevent consumers from duplicating the movie discs.

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Just when I was coming to terms with my ambivalence toward my Kindle e-book reader, Amazon and the publishers have gotten greedy.

I’ve had a love-hate relationship with the device since I bought my first one about 9 months ago. As a frequent traveler and voracious reader, I’ve found the Kindle to be nearly ideal. I never have fewer than a dozen books in its memory, and they’re always things I want to read.

As someone who believes we should often interact with media instead of passively consuming it, however, I don’t think much of the Kindle for any purpose other than reading a narrative. And given what a disaster “digital rights management” (DRM) is becoming for scholarship, culture and ultimately freedom, the device’s restrictions on how I can use what I’ve purchased are deeply troubling.

Still, I’ve been using it with some degree of satisfaction (as have enough other people to have helped boost Amazon’s stock price, so as the holder of several hundred shares I’m slightly better off in that way, too). The second-generation model improved nicely on the first–among other things, fixing some user-interface quirks, letting me charge it via a USB cable, and boosting the battery life.

The books I load onto the device fall generally under the casual entertainment category. I buy a Kindle book the way I buy a movie ticket (or did before going to theaters became such a crappy experience).

These are books, like most movies, that I’ll read or watch once and forget about. A physical book is more like a DVD–something I want to own and enjoy again and again.

So the kinds of books I tend to buy for the Kindle are the sort I’d often pick up at an airport newsstand, namely mysteries, thrillers and semi-trashy novels that I’d sometimes leave in hotels or airplane seat-back pockets once I’d finished them. (I also subscribe to several magazines, and consider it a favor not to see the advertising.)

Once I got accustomed to reading e-books, I started doing something that had been out of character in the analog era: buying new books that, in print, were available in hardcover only. Why? The price, typically $10 (okay, one penny less), was right. In fact, my new-book purchases soared.

But not for long. In recent weeks, Amazon (AMZN) or the publishers (or both) have done their best to deter me from buying the latest releases. Prices have gone up, way up.

Now, I often find books for which I’d have gladly paid $10 listed at $14 or $15. I save these to a list I keep on the Amazon website, called “Too expensive for Kindle,” and periodically check to see if the price has dropped. So far, not yet on any of these.

Hiking prices this way creates a bad deal for the customer. Amazon’s price for a new hardcover is typically just a couple of dollars higher. This means I could buy the hardcover, read it and donate it to my local library, and–after the tax deduction–come out ahead. I’d do even better taking the book to my local used-book store and getting cash.

But I almost never buy new hardcovers of books I don’t expect to reread or use as a reference, because a) I’m kind of cheap; and b) I can stand waiting for the paperback. So if prices stay high, I stay away.

Now, sellers have every right to charge more for popular books, especially when they’re new. This is basic supply and demand. But when the price only makes sense for people who consider the ultra-portability of an e-book paramount, that’s a turnoff for other potential buyers.

As a customer I also understand supply and demand. My demand is extremely elastic, and in this case it’s snapped.

Last week’s introduction of the Kindle DX was framed in many ways by different constituencies, but I was taken aback by the praise heaped on the device by several newspaper people, including the CEO of the New York Times Co. (NYT) (in which I also own a small amount of stock). Newspapers aren’t going to fix their considerable woes with Kindles, and anyone who thinks so lives in a fantasy world.

The DX, with its bigger screen, strikes me as potentially useful in several ways, possibly including the textbook function that Amazon hopes to jumpstart with the help of several universities (including the one that employs me). But if textbook publishers don’t radically cut prices on the outrageously expensive books they sell, they will find themselves creating a strong incentive for precisely what they don’t want: unauthorized copying.

I suspect the DX will prove most useful in more prosaic ways. For example, it could be a nearly ideal container and viewer for technical documentation–thick manuals that need periodic updating, where the cost of printing is prohibitive and the bulk of the books is daunting for the user.

Will all of this be made moot by the widely anticipated Apple (AAPL) “NetPad” or whatever it’s going to be called? I refer to a device that looks like a larger version of the iPod Touch, which would be a wonderful mobile multimedia player, among other likely capabilities.

I doubt it. If you enjoy severe eye strain, reading books on a back-lit, glossy display is just the ticket. The passive displays on Kindles, the Sony (SNE) e-reader and other such devices are much better for this kind of reading.

One size does not fit all in the emerging world of devices. Then again, one carry-on bag doesn’t hold all devices. For now, however, the Kindle has a place in mine.

Starting late last year, movie studios began peddling premium-priced DVDs that come with the right to download a digital copy of the movie onto a computer.

Now a federal judge will weigh in on whether the studios are the only ones who can legally make those copies, or if other companies can jump on the bandwagon.

Judge Marilyn Hall Patel of U.S. District Court in San Francisco on Friday will open a hearing to evaluate whether RealNetworks (RNWK) can sell a computer program called RealDVD that allows consumers to copy DVDs onto computers.

Last fall, the studios won a temporary ban on the sale of RealDVD. If Judge Patel rules the program can go back on the market, it could hamper Hollywood’s efforts to cash in on consumer demand for digital copies of the DVDs they buy.

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Look at the outer shell–the parachute pants, the piano-key tie, the fake tuxedo T-shirt–and you might mistake me for a slave to fashion. Do not be deceived. Early adoption isn’t my thing. I much prefer late adoption, that moment when the trend-worshipping sheeple who have early-adopted drive the unsustainable way of life I so stubbornly cling to ever so close to the edge of obsolescence, that I’ve no choice but to follow. This explains why I bought cassette tapes until 1999, why I wouldn’t purchase a DVD player until Blockbuster (BBI) cashiered their VHS stock. Toothpaste? I use it now that it’s clear it’s here to stay.

So I’m not inflexible. But there is one promise I’ve made to myself. And that is that no matter how long I live, no matter how much pressure is exerted, no matter how socially isolated I become, I will never, ever join Facebook, the omnipresent online social-networking site that like so many things that have menaced our country (the Unabomber, Love Story, David Gergen) came to us from Harvard but has now worked its insidious hooks into every crevice of society.

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During a long career as a television and technology executive, Mitch Berman has tried to sell several different iterations of TV, often in their formative stages. These included premium cable networks (at HBO), original cable programming (E! Entertainment Television), satellite TV (Sky and Foxtel), interactivity (OpenTV), and video on demand (Arris). Now, Berman is onto the next new thing, delivering TV through the Internet. His company, ZillionTV, faces long odds but has at least three advantages over the increasingly crowded field of online TV players: It brings DVD-quality programming straight to the TV set. It has a remote control that sets a new standard for ease of use. And its advertising model actually encourages people to watch commercials, rather than undermining their value to advertisers and programmers. Berman is positioning it as a service that offers unique benefits to consumers, advertisers, content companies and broadband providers. Here’s hoping the Hollywood studios that own a piece of Zillion don’t strangle it in its crib, which they could easily do….

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Netflix (NFLX) is suddenly one of the Valley’s hottest companies, as the DVD-by-mail company gradually morphs into everyone’s favorite streaming movie service. The service is showing up everyplace: on TiVo boxes, on the Web, on Xbox Live, in Blu-Ray disk players. The company reported blowout Q4 earnings earlier this week and provided a strong Q1 outlook. Netflix has become a hot counter-cyclical, nesting-in-the-living room recession play; the stock has doubled since late November.

Stifel Nicolaus analyst Scott Devitt thinks the rally has gotten a bit out of hand; he downgraded the shares this morning to Sell from Hold, asserting that fair value is about $28, or well below the current level.

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The genesis of Netflix (NFLX) came in 1997 when I got this late fee, about $40, for “Apollo 13.” I remember the fee because I was embarrassed about it. That was back in the VHS days, and it got me thinking that there’s a big market out there. So I started to investigate the idea of how to create a movie-rental business by mail. I didn’t know about DVDs, and then a friend of mine told me they were coming. I ran out to Tower Records in Santa Cruz, Calif., and mailed CDs to myself, just a disc in an envelope. It was a long 24 hours until the mail arrived back at my house, and I ripped them open and they were all in great shape. That was the big excitement point.

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On Feb. 3, Sony Pictures Home Entertainment (SNE) is going to make an honest man of me. Finally I will be able to buy a legal DVD of one of my favorite movies, Carol Reed’s 1959 “Our Man in Havana.” But there’s still no rhyme or reason to what films are available in any digital form. If, for example, you happen to have a videotape player around, you can watch an old VHS version of “The African Queen.” But you can’t buy it on DVD or download it from any of the Hollywood-sanctioned online services.

The basic problem is that Hollywood is attempting to preserve an analog business model in a digital age.

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