Will shrimp's eyes help create a better DVD? The answer is yes. Researchers at the University of Bristol, England, who are studying the shrimp's eye have found a way to create a better DVD.

How is this possible? Scientists discovered that the Mantis shrimp, found off the coast of Australia, can see in 12 primary colors, four times that of humans. The shrimp's eye can detect different kinds of light polarization which is the direction of oscillation in light waves.

Netflix (NASDAQ: NFLX) is feeling a little heat from studios Time Warner (NYSE: TWX), News Corp. (NASDAQ: NWS), and General Electric's (NYSE: GE) NBC Universal. The major media companies would all like to make more money from Netflix's business model, according to BusinessWeek.

No one is really satisfied these days with the DVD industry. Growth in home video is no longer what it used to be. So content makers perceive a need to engage new strategies to offset the this lack of expansion. It would be nice if those strategies were confined to innovation in movie development and the reduction of project budgets. Instead, trying to negotiate more beneficial deals with distributors such as Netflix will probably be the focus of media execs.

In the past, it has been the Nintendo (OTC: NTDOY) Wii or Apple's (NASDAQ: AAPL) iPhone creating holiday hype -- what product will it be this year?

Quite honestly, none. The tech realm is still looking for the next big holiday hit. This is why it appears that we could be facing a holiday season full of buy-one-get-one-free specials or pushy salespeople trying to get you to allow their company to install the new flat-panel TV or add ons that will help integrate your home entertainment system.

So, what does this mean for electronics retailers?

Disney (NYSE: DIS) programmed a new movie recently on one of its prime media assets. The film, titled Princess Protection Program, debuted on the Disney Channel and stars a young actress named Selena Gomez. The casting choice was no accident. Because Disney tries to be as synergistic as possible (the company is generally good when it comes to the science of synergy, although there are certainly opportunities for it to be even better), the Mouse made sure to use Gomez since she is the popular star of another Disney Channel program called Wizards of Waverly Place, a project meant to capture at least a little of the Harry Potter magic.

Netflix (NASDAQ: NFLX), a DVD-rental business that competes with Blockbuster (NYSE: BBI), was upgraded yesterday by Michael Pachter, an analyst with Wedbush Morgan Securities. He sees good tidings ahead for the company. He believes that Netflix will see higher margins and a healthy stream of earnings. His thesis centers on the fact that the subscriber base is likely to grow and that streaming movies will lower the cost of delivery.

Upgrades are tricky beasts. Ideally, an investor or, more likely, a trader, wants to be in the stock before the upgrade occurs. Buying a company after it's been upgraded requires a lot of due diligence. And you have to get over the fact that you might be buying at a high price.

You know you're probably looking at a tough business situation when the first thing you see on an earnings release is a pair of bullet points related to financing strategies that are clearly meant to show the reader that a company is getting its house in order.

Such was the case with Blockbuster (NYSE: BBI) and its Q1 report, which came out Thursday after the bell. Remember, this is the company that, not long ago, received a notice about its woes.

Liquidity is the name of the game these days for Blockbuster. Too bad it isn't the company's business model. As far as that goes, the video-rental chain is still having its difficulties. Revenues dipped 19% to $1.1 billion. On an adjusted basis, net income came out to 19 cents per share versus 21 cents per share in the year-ago period.

Netflix (NASDAQ: NFLX) did a spectacular job in Q1. The famous DVD-rental-by-mail entity issued its quarterly numbers on Thursday after the bell. On an adjusted basis, Netflix delivered 40 cents per diluted share. That represented bottom-line growth of over 70%. I guess movies truly are resistant to recessions, huh? Revenues advanced over 20%.

According to earnings.com, that 40-cent figure means that management destroyed expectations since Wall Street was looking for somewhere around 31 cents per share. I should point out, however, that I've noticed that some other sources listed the expectations as being a little higher than 31 cents. No matter, Netflix beat the bottom line.

I love this news item, and I think shareholders of Time Warner (NYSE: TWX) -- parent company of BloggingStocks -- should, too. Time Warner wants to allow customers the opportunity to buy titles from the media conglomerate's movie catalog via an on-demand DVD protocol. So, if a movie isn't currently available on retail shelves, you could still order it. The title is copied to a disc and sent off to the consumer. No fuss, no mess, no inventory to manage. It's great!

I think on-demand DVD manufacturing needs to be exploited in a bigger way. It isn't new, but you don't really hear about it. Viacom (NYSE: VIA) and Amazon's (NASDAQ: AMZN) on-demand publishing arm, CreateSpace, use it as a way of selling content without carrying inventory. I'd have to believe that if such services were promoted on an extensive basis, they might catch on.

Blockbuster (NYSE: BBI), the troubled DVD-rental chain that competes with Netflix (NASDAQ: NFLX), reported earnings for the third quarter on Thursday. The top line decreased by a little under 3%, and the net loss per share was $0.08 on an adjusted basis, which was $0.07 better than expected. Okay, I suppose that's kind of cool from a certain angle. In fact, one analyst quoted in the piece had a good take on the company.

I, however, do not have a good take on Blockbuster. I am not bullish in the least. For one thing, it takes a lot to look past a net loss and say that there's something to the earnings story that goes beyond the bottom line. For another thing, the press release indicates that Blockbuster is not doing well in terms of cash flow. Management needed to use $18.2 million for operations during the third quarter, which was slightly more than the amount needed in last year's similar period. And as for free cash flow, that was negative $53.7 million in Q3 2008 versus negative $38.6 million in Q3 2007. This doesn't scream "Buy Blockbuster!", does it?

Another negative aspect to the story is that the gross margin went down by 70 basis points. I will give one bit of credit, however: same-store sales for domestic locations actually increased slightly over 5%, and worldwide comps expanded by almost 2%.

Netflix (NASDAQ: NFLX) had something of a flashy third quarter. The online DVD-rental company reported the numbers on Monday after the market closed. Revenues did well, rising 16% to $341.3 million. The bottom line, however, was an even better story. Earnings per diluted share on an adjusted basis rose 38% to 36 cents. How does this compare to Wall Street estimates? Beautifully, as analysts were looking for 34 cents per share. So management was able to deliver two extra pennies. It's cool when a company can go beyond the usual beat-by-a-penny routine, isn't it?

I applaud Netflix for its earnings data, but I can't say I'm a huge fan of its current cash-flow performance. Operating cash flow dipped nearly 6% to approximately $73 million. Free cash flow declined almost 28% to about $26 million. Looking at other numbers, I see that gross subscriber additions increased 18% on a year-over-year basis. Gross margin also improved.

Unfortunately, CEO Reed Hastings believes that the recession will negatively affect subscriber growth rates. Of course it will. At this point, every business, and more importantly to investors and traders, every stock is going to feel the wrath of the economy and the market bears. Sure, Netflix made deals with Disney (NYSE: DIS), Starz and Microsoft (NASDAQ: MSFT) that may help the company offset some of the economic realities out there, but I think the bottom line is that you'll have to be careful about buying Netflix at this point in time.

I read an article out on the AP over the weekend that reflected some thoughts I've been having about the Blu-ray medium. It just doesn't feel like people are that crazy for the format just yet, and it looks like my perception may be right.

The AP piece talks about how the price of the players seems to be too high for consumers. With some going for $399, the value issue is understandable in the context of an economic slowdown. Another good point was brought up: since consumers have been busy upgrading to large-screen TVs, there's just not enough left in some household budgets for adoption of the relatively new technology.

Wal-Mart (NYSE: WMT), however, was mentioned as a retailer that is planning to become competitive in terms of price on Blu-ray units. Nevertheless, pundits believe it might be a few years before Blu-ray becomes saturated in homes across America.

As an investor who holds media companies in his portfolio -- Disney (NYSE: DIS), Marvel (NYSE: MVL) and, through General Electric (NYSE: GE), I have exposure to NBC Universal -- I am hoping that the new format becomes ubiquitous as swiftly as possible. Compared to DVD's initial adoption, there is some statistical evidence that the curve is actually proceeding at a faster pace.

Lions Gate (NYSE: LGF), the feisty little studio that is responsible for torture-porn franchises Saw and Hostel, has hooked up with Apple (NASDAQ: AAPL) to see if consumers care about owning digital copies of the movies they buy on DVD and Blu-ray format.

According to the following press release, Lionsgate will include an iTunes digital version of select projects on certain home-video releases. The digital copy will allow users to transfer a movie to an iTunes account, so it could then be viewable on multiple devices like PCs or Macs, iPods, Apple TV and iPhones. First up for the iTunes digital treatment will be Sylvester Stallone's Rambo -- yes, the old soldier is still around -- to be released to home video in May.

As the studio makes clear in its press release, this is all about experimentation with the promotion of new distribution models. Lionsgate wants to efficiently, and effectively, create new opportunities for its library. It's not alone -- Disney (NYSE: DIS), Viacom (NYSE: VIA), Time Warner (NYSE: TWX), Sony (NYSE: SNE) and General Electric's (NYSE: GE) NBC Universal asset are all on a never-ending study of how best to leverage the digital era to make money from content portfolios. Lionsgate wants DVD buyers to realize that they can use iTunes to buy movies from its catalog. It's a bit weird to me, though, since one would figure that a person who buys a DVD will probably just access that particular content from the DVD itself. I understand the value of transferability, of course, but if Lionsgate -- or any content provider, for that matter -- simply ensures that each digital product sold online contains unique, compelling extras that cannot be found in any other format, then a digital library will be that much easier to monetize.

At any rate, it will be interesting to see how Apple and Lionsgate do with this scheme. Apple and its iTunes brand are certainly powerful drivers of digital distribution, so maybe users will perceive a value from the digital copies.

Disclosure: Steven Mallas owns shares of Disney and General Electric; positions can change at any time.