It's true, they've already lost
I've noticed that on a fairly new version of uTorrent, I can now stream movies I am downloading.
What this does is (I would assume) prioritise the first segment of the file so I can watch it a couple of minutes after starting the download. That's it for me, done!
No more waiting for a 2GB file to download first before watching it. I mean, I'm talking 2 mins to start watching a movie.
Let me say to a few companies here - Sky - your repetitive rolling of the same movies day in, day out, for a month is what has caused me to cancel my Sky subscription. If you'd have kept an interesting, varied schedule then I would have probably continued to pay the £62 per month.
It doesn't even need to be consist of new movies. Have a play around... get one of these know-it-all 24 year olds who thinks they have greatest taste in movies as a temp and let them do the schedule. They might actually choose something other than 'How to train your dragon', 'Inception' and 'Little Fockers' 200 fucking times a month.
Netflix - pull your finger out and launch here ASAP, preferably at under £15 per month. I guarantee you, people will bite your arm off. Your biggest competition is LoveFilm and they're a joke - and not a very funny one, either.
At the end of the day, if you give people a good service at a reasonable price, people will pay. This is a fact. Look at the Apple App Store (with 59p apps), Spotify etc...
If it's easier for people to pay, they will. Charge too much, and it's back to piracy. Your call.