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PeerflixA Menlo Park-based start-up called Peerflix is capitalizing on post-holiday returns to boost its peer-to-peer DVD exchange business. Instead of waiting in long lines at retailers and dealing with stringent return policies to exchange those unwanted or already seen DVDs you received for Christmas, Peerflix is offering a new DVD release to every new user who activates their account between December 27, 2005 and January 9, 2006.

Peerflix is similar to Netflix - upon sign up the company mails you a starter kit with return envelopes - and then you make two lists: movies you want to see and movies you'd like to trade. The site then matches you with other registered users with the same titles to offer or take. But unlike Netflix, there are no monthly fees - just a $0.99 per trade charge.

Peerflix is built on an infrastructure similar to Kazaa's music sharing platform, but Peerflix creators wisely decided to focus on tangible DVDs, rather than digital movie trades, to avoid rights management issues. So they're maximizing peer-to-peer, but it's completely legal.

Industry sources predict that consumers will spend $5.8 billion buying DVDs in the fourth quarter of 2005, up from $5 billion in fourth-quarter 2004...meaning the secondary market for trades could be quite large. But Peerflix's success will depend on how many users they can activate, to ensure that their library of offerings continues to grow.


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