Online streaming giant Netflix finally launched in the UK this past weekend, offering customers a limited range of Movies, Television Shows and Documentaries for unlimited viewing at £5.99 a month.

After year’s of hearing friends talk enthusiastically about the service in the States, it’s good to see its arrival on these shores. At the very least, the increased competition has already driven their established local rival LoveFilm to aggressively pursue new deals with the likes of Sony for the rights to stream content out to customers. LoveFilm has also launched a rebranded streaming only package labelled “LoveFilm Instant”, and undercut their new rivals by charging just £4.99 a month for a limited time. The battle is on.

LoveFilm has a pretty ordinary catalog of titles available for “instant” online streaming at the time of writing. With an impressive 71,000+ TV & Movies available for rental on DVD, the company can only offer 4,890 for free unlimited streaming + an additional 1,013 titles at pay per view rates. The quality of the streams served by LoveFilm Instant out to my XBox and Widescreen TV isn’t hugely impressive either. It’s certainly not up to iTunes HD quality and on a larger display you really see it.

Netflix also unsurprisingly suffers from the dearth of content at launch. They do have a decent collection of hit television shows available from the likes of the BBC and Channel 4. You’ll find Doctor Who, The I.T. Crowd, The Inbetweeners as well as transatlantic hits such as Heroes, 24 and Dollhouse. There’s also all seasons of classics such as Fawlty Towers, The Young Ones and The Royal Family available for streaming.

The movies side is much less impressive. There’s a sprinkling of mainstream hits such as Sin City, The Usual Suspects and Saving Private Ryan, but there’s almost nothing (yet!) in the way of recent must-see movies. The company is aware of the problem, and is reported to be in final stage negotiations with several major studios. Netflix will need to move quickly to convert those taking the 30 day trial into full paying customers by increasing the amount of compelling content here.

I started out testing Netflix on my AppleTV and was suitably impressed. I like the interface matches very closely the familiar iTunes Store interface when browsing for movies on the device. Also the quality of the streams I tested are visibly higher than what I receive from LoveFilm. Netflix offers a website option to enable “HD” when available (be warned: you will use more than 1gb of data per hour if you’re on a data capped connection).

XBox 360 support for Netflix is said to be coming here very soon, while both the existing iPhone and iPad apps are already usable in the UK.

The iOS app is very easy to use on either device. It makes recommendations based on your viewing habits over time, and also make suggestions based on what your friends are watching and recommending – if you optionally decide to link the app with your Facebook account. I streamed an episode of The Inbetweeners to my iPad and didn’t run into any problems. I also love the ability to pause a viewing on one device, and pick up on another. For example: I stopped watching “Sin City” on my television 37 minutes in, picked up my iPad, loaded Netflix, and there was my movie waiting for me in the “Continue Watching” section at the top of the app. Very nicely done.

At the end of the day Content is King. Netflix will only succeed if they are able to bring enough major studios on board here in the UK that allows them deliver a wide range of Movies and TV shows customers want. It’s a challenging environment with Sky TV already holding broad rights with all the major studios for the top tier broadcast window. This pretty much guarantees you won’t see Hollywood blockbusters on either Netflix or LoveFilm Instant until long after their cinematic release.

That said, this increased competition in the UK online streaming market should be healthy news for all of us. I’ve always felt the LoveFilm foray into online streaming was something of a half-arsed attempt at complimenting their existing physical media business. Netflix comes here focused solely on delivering a top quality VoD service. This should force LoveFilm (and others operating in this space) to really raise their game or risk becoming the next Blockbuster. Services like Netflix and LoveFilm Instant are the future. Renting physical media – whether collected from a store, or having the discs delivered to you in the post – is the past.