A new pact between cable channel Epix and Netflix to stream movies online makes the video rental giant a pay-TV player, whether it admits it or not.

After Tuesday's agreement, Showtime and HBO should start looking over their shoulder, because make no mistake, Netflix is playing on their turf.

Under the agreement, Netflix subscribers will get to stream box-office hits such as "The Last Airbender" and "Iron Man 2" 90 days after their premium pay TV and subscription deals.

And Tuesday's move only builds on a similar arrangement the company made last month with Relativity, which gives Netflix the licensing rights to all movies on which Relativity controls distribution. That amounts to some 14 movies over the next 12 months. Post continues after video:

All of this dramatically increases the number of titles that Netflix offers its customers digitally at a time when the company is trying to encourage subscribers to migrate away from by-mail delivery and towards online distribution.

Less than three years since the subscription rental company launched its streaming service with less than 2,000 titles of dubious quality, Netflix is clearly gambling that the future is digital. By turning its subscribers onto streaming, it will dramatically reduce its overhead. The company plans to spend $700 million on postage next year, on its way to $1 billion in postage fees in the next few years.

And last quarter, it reported that 61 percent of its customers streamed all or part of a movie, up from 37 percent in the second quarter of 2009. Read more

How much longer can Blockbuster hold on?