Netflix, seeking not to be bypassed in the transition to digital distribution of movies, removed limits on how many films and TV shows subscribers can watch over the Internet.

The move comes just as Apple Inc. is set to unveil plans for users to rent major Hollywood movies online through its iTunes Store.

Netflix, which pioneered the online movie-rental business in 1997, had capped the number of hours available to its 7 million subscribers based on the price of their monthly plan. The Los Gatos, Calif.-based company faces stiff competition from Apple, Amazon and others working on digital distribution of movies in the hope that video-on-demand eventually can supplant DVDs.

Now Netflix customers with plans costing $9 per month and up can spend unlimited hours streaming movies and TV shows for no extra charge instead of waiting for the selections to be shipped in the mail. Those on the $5 plan will get up to two hours of free monthly streaming.

Most movies just released on DVD and current TV shows are unavailable on the company's "watch instantly" service, however. Netflix, the largest mail-order movie company, offers a library of more than 90,000 DVD titles via postal delivery, but it has only 6,000 movies and TV shows for instant viewing.

For the most part, the studios are reluctant to make the newest DVD releases available for streaming and downloading.

"There is a lot of stuff like 'Revenge of the Nerds 4' — the kind of movies you can already see on TBS," said Michael Pachter, analyst at Wedbush Morgan Securities in Los Angeles.

Even so, he said, the expanded service could help Netflix build loyalty in video-on-demand.

"They aren't doing this to make money today but to have the technology in place to be able to participate when the Hollywood studios go to a downloading model," said Pachter, who rates the stock a "buy."