I have become increasingly intrigued with PeerFlix lately. They're like Netflix but with no central inventory. You send your movies directly to someone else on request in exchange for points. Then you use the points to get more movies. Net cost is $1.37/trade. They sucked me in last month on a weblogger promo -- they gave me two free movies with no strings attached. This gave me a starter inventory to trade from. I then posted a bunch of old movies I had. Some were pretty good, some weren't (many were freebies I got via rebate when I bought a DVD player in 1999). But I could live without them. Surprisingly, people wanted them.
The best part was trading the pan/scan version of a movie I love (Chicago) for the widescreen version. Best $1.37 I've spent.
The worst part is the emails. Since its a distributed system, if you request a specific movie they email multiple people asking them to send the movie. The first person that commits to sending it within 24 hours closes the deal. However, if you're not sitting directly on top of your email this means you end up getting lots of requests that someone else has already filled. Including requests for some atrocious movies (like Rambo) that I am eagerly looking forward to saying goodbye to.
I'm cancelling Netflix at the end of the month (5 year subscriber). The selection at peerflix isn't as good. Its about the same speed since you get mailed the next movie as soon as you commit to send a movie (like Netflix did before 2001). But you can make up for selection by having a bigger "inventory". If you want 5 movies instead of 4, just pay $10 at Amazon for a used DVD and your inventory increases. After $20 on Amazon, the two free movies, and some trades, I have a 6 movie inventory. And my new cost drops to $5/month from $20.
Peerflix parallels Ebay. In the early days, discounters were king, with online auction sites run by discounters selling from their own inventory. Then Ebay cut out the middleman, settling for a few bucks on each transaction. Netflix does a great job, but the $1.37 may crush them in the long term. Peerflix can clearly make real profits with this model.