Netflix Inc. on Tuesday announced a deal reportedly worth $1 billion to bulk up its increasingly popular Internet streaming service with Hollywood blockbusters such as 'Star Trek,' 'The Curious Case of Benjamin Button' and 'The Godfather.' Netflix's deal with a joint venture formed by powerhouse studios Paramount Pictures, Lionsgate Entertainment Corp. and Metro-Goldwyn-Mayer Inc. marks a milestone in the evolution of how Hollywood distributes entertainment to its audience. 'It's more of an incremental step than a giant leap,' said analyst Colin Dixon, a senior partner for the research firm the Diffusion Group. 'What's exciting here is it really reaffirms that the Internet is a serious delivery channel. Netflix has really been the catalyzing force on the market and it has illustrated very graphically that consumers are very comfortable consuming quality content directly from the Internet and in some respects, it's their preferred medium.' Published reports said the deal between Netflix, the Los Gatos, Calif., firm that has built its business mailing rented DVDs to its subscribers, and Epix, a pay TV service that is a joint venture between MGM, Lionsgate and Viacom Inc.'s Paramount, is reportedly worth $1 billion in licensing fees over the next five years. Neither Netflix nor Epix of Beverly Hills would comment on the financial terms of the deal. However, when asked during a conference call with analysts Tuesday, Lionsgate chief executive officer Jon Feltheimer said the $1 billion number was 'mostly in the ballpark.' And he said the deal would make Epix 'immediately profitable.' Netflix launched its video streaming service in 2007 with only about 2,000 older titles, but the latest deal gives the company access to about 46 percent of new movies Hollywood produces, said spokesman Steve Swasey. Netflix's business model is shifting to online distribution. In the past year, 61 percent of the company's 15 million subscribers have rented a movie or TV show streamed over the Internet using the 'Watch Instantly' feature. Streaming increased 37 percent compared to previous year. Also in the past year, that feature has become available through a wider variety of devices, including video game consoles, Internet-enabled TVs and Blu-ray players and Apple Inc.'s iPad. Nearly all Netflix members still received DVDs the traditional way through the mail, but the company is preparing for 'the natural evolution' of digital entertainment as it moves from physical discs and to online distribution, Swasey said. As with previous streaming deals with studios, the agreement protects the movie studio's revenues from theatrical, premium pay TV and video-on-demand channels. Starting Sept. 1, Epix will make films available to Netflix 90 days after they first shown on the pay TV channel. Previous deals with Universal and Twentieth Century Fox call for movies not to be available for streaming until 28 days after their DVDs and Blu-ray have been released. Netflix also has access to streaming movies from Sony Pictures and Disney through a deal with Starz Entertainment, LLC. However, Netflix on July 6 signed a deal with independent producer Relativity Media LLC to stream movies when they also become available on pay TV. The deal goes into effect next year with 'The Fighter,' starring Christian Bale, Mark Wahlberg and Amy Adams, and 'Season of the Witch,' starring Nicolas Cage. Both films debut in theaters later this year. Dixon noted the Netflix deals still allow the studios to pursue other online distribution partners, such as Apple's iTunes or Wal-Mart Stores Inc., which has acquired movie downloading service Vudu. So the studios 'are really looking at it now as a major source of revenue and an enabler for building new business,' he said. Dixon, however, said the reported cost of the Epix deal 'sounds like a ridiculous amount of money. If Paramount is allegedly getting $1 billion, what is Disney going to ask for?' However, he also noted Netflix membership has nearly doubled since it began its instant streaming service. Also, Netflix is spending about $600 million a year in postage to mail DVDs, a cost expected to increase to $700 million next year. A shift to streaming movies could reduce that expense, which could further build up the online library, Dixon said. The price of Netflix stock soared by nearly 7 percent to close at $125.01 per share, up $8.11, on the Nasdaq stock market. 