Dish-Blockbuster: The new stream team

SAN FRANCISCO - Netflix has always prided itself as the proverbial upstart. Now it's going to get another chance to live out that creed - and everybody will be watching.

The Blockbuster video store chain and new owner Dish Network are ganging up on Netflix with a less expensive way to watch Internet video and rent DVDs through the mail. Announced earlier today, the Blockbuster and Dish package will cost $10 per month, the same price that Netflix offered until it made a change in its service that drove up its rates by as much as 60 percent. But there's a major catch to Blockbuster's new Movie Pass: It's only available if you also subscribe to Dish Network's pay-TV service.

Video: Dish-Blockbuster announcement
CNET: How the event unfolded

To be sure, Netflix is in the most vulnerable position it's been in for years. In theory, at least, the Blockbuster-Dish combo could turn into a very big force in the flat-fee "all you can watch" streaming market. Meanwhile, Netflix has been losing customers due to an abrupt price hike in July. Its 24 million U.S. customers are incensed about the higher prices and a recent decision to spin off DVD rentals into a new website called "Qwikster."

To top it off, there was more disruptive news this week when a company executive acknowledged that movie content, the bread and butter of the Netflix offering, is getting too expensive for streaming. Instead the company will focus more attention on getting rights to TV programming.

But after the hype surrounding a Dish-Blockbuster combination wears off, Netflix may not wind up much worse for wear. CNET's Roger Cheng notes that while the package may attract some new consumers, it's still cold comfort for the majority of Americans who aren't Dish customer - particularly for people living  in major metropolitan areas such as New York, where satellite service isn't a legitimate option.