Streaming movies: It's the pictures that got small

Gloria Swanson in "Sunset Boulevard," on an iPhone.

(CBS News) A COMMAND PERFORMANCE is at just about any movie fan's fingertips nowadays, proving in a high-tech way that what's old truly can be new again. Our Cover Story is reported by Tracy Smith:

Before the big screen was actually big, movies were more personal: it was just you, a crank, and a few hundred flipping cards. But the viewing WAS on-demand.

Truth is, the very first motion pictures could be watched on a handheld device, and in the hundred-odd years since flip-books, it seems movies have come full circle.

"Today everything's possible, and it becomes a consumer choice," said Carl Goodman, who runs New York's Museum of the Moving Image.

Movies, Smith said, "started off little; then we enjoyed this communal experience; and now it's becoming -- for some people at least -- a solitary and tiny screen again."

"You can watch 'Lawrence of Arabia' on an iPhone; it doesn't necessarily mean you should," Goodman said.

It might be hard to imagine the vast emptiness of the desert on a small screen - but it is mighty convenient.

"Throughout the history of movies, people go to the movies. Movies now go to the customers on their personal screens," said Jason E. Squire, who teaches at USC's School of Cinematic Arts.

"I would imagine there are filmmakers who would say, 'No, no, no, no, this is heresy. This is not how my film should be seen,'" said Smith.

"But also filmmakers are likely to say, 'I want my product to be seen,' and if it's going to be visited and revisited, no doubt, something will draw them back," said Squire. "But these changes are awfully exciting. And they come down to more choices for customers. This is a good thing."

And that might be the founding principle of Netflix. The company started in 1997 as a movie DVD-by-mail service . . . all those bright red envelopes, remember?

They'll still send you a DVD. But most of their 27 million-plus subscribers pay around $8 a month to have unlimited movies or TV shows streamed directly to them, with all of their choices queued up, waiting to be watched.

And right now, Netflix is the biggest player in video streaming. During peak Internet use hours -- between 9 p.m. and 12 a.m -- Netflix use accounts for 33 percent of ALL streaming traffic in North America.

Streaming movies has been blamed for people not going to movie theaters. But Ted Sarandos, Chief Content Officer of Netflix, disagrees: "I think it's the opposite. I think the reason that people keep going at all is because of their love for films."

Sarandos buys what Netflix customers get to see -- and that makes him one of the biggest players in Hollywood right now.

How deep are his pockets? "Pretty big," he told Smith.

They have to be: Netflix recently inked a deal t pay Disney a reported $350 million a year to carry Disney movies starting in 2016. There's also a pricey deal with DreamWorks for a cartoon series, based on the upcoming movie "Turbo."

"We have some deal with every studio and every network," Sarandos said. "Nobody's not in business with Netflix in some position -- should say, there's not a major supplier."

But for all its success, there has been an occasional stumble: In 2011, Netflix announced it would split its streaming video and DVD-by-mail business, and raise prices. It all made sense on paper, but after subscribers howled and left in droves, the plan was scrapped.

Sarandos said he didn't know how many subscribers were lost. "We went negative for the first time back then. It really was a blip in the history of this company."

"Even though the stock was tanking for a while . . . people weren't upset about that?"

"The stock from the employee standpoint -- I mean, it's been a wild ride."

"So while there were those who were saying, 'Netflix was doomed,' what were you thinking?"

"I hope they're wrong!" Sarandos laughed.

And Netflix might have the last laugh. The company makes money by adding subscribers, and the best way to do that, they reckon, is to give people something they can't see anywhere else.

So now, Netflix is making its own "must-see TV." They ponied up a reported $100 million to produce "House of Cards," a political drama starring Oscar-winning actor Kevin Spacey. Netflix released the entire first season on Super Bowl weekend. Viewers can binge on all 13 episodes, if they want, in one sitting.