Hello Goliath? It’s David, again.

While Blockbuster has busied itself working out a deal with Circuit City, its nemesis, upstart Netflix has steered clear of such brick-and-mortar has-beens, instead inking deals widely with technology firms and movie studios, in an attempt to offer its content on as many platforms as possible. Blockbuster is still thinking old school, with its eye on the hardware sold at Circuit City over which to play its movies. But Netflix is committing to a wide range of distribution channels.

“We’re not betting on any one device on getting internet to the TV,” says Ted Sarandos, Netflix’s chief content officer, who’s in charge of developing the company’s digital distribution. “We’re not trying to change consumer behavior in any way—we gradually want to tap into the behavior of people who are interested [in film] in all different ways.”

Netflix’s practice of delivering DVD’s by mail may have once upended its competitor’s brick-and-mortar business model (as well as its clumsy foray into delivery by mail), but Netflix now finds itself up against more nimble technology firms and start-ups like Apple, Amazon, and NBC/News Corp. venture Hulu.com. Amazon unveiled its video-on-demand service, Unbox, in 2006, and gave access to TiVo owners last summer, while Apple began offering a number of streaming movies via iTunes that same year and through its hardware product, AppleTV, in 2007. And just last month, Hulu.com launched, offering free access to NBC and News Corp. content, mostly television shows but also some movies. Both Netflix and Blockbuster are facing serious challenges, each racing to find a solution that will help transform it into a digital-age company—while knocking the competition out of the way.

Which company's approach will prevail is an open question, but Netflix has been able to turn back Blockbuster’s advances before, and Sarandos played no small role. Since joining Netflix in 2000, he has overseen the growth of the company’s film library from 2,000 to more than 100,000 titles, and helped the movie studios make more money on their back catalogs by generating interest in older films through the Netflix recommendation engine. Sarandos brought some inside experience when he joined the company. Before Netflix, he worked at Blockbuster’s exclusive video distributor before Blockbuster began buying videos directly from the studios. Sarandos also brokered the first revenue sharing deal between a retail video chain and a movie studio when he worked at Torrance, Calif.-based VideoCity.

Netflix is now the dominant player in mail-order movie rentals, with 7.5 million subscribers, compared with Blockbuster’s 3.1 million. But with internet technologies in a constant state of flux, Netflix is in no position to rest on its laurels. This year, Netflix is betting on the growth of streaming movies on television and plans to distribute movies directly to home sets by the end of the year. Netflix has already announced a partnership with electronics manufacturer LG to produce set-top boxes that will stream Netflix films to home TVs, and it plans to forge partnerships with other hardwaremakers to establish new ways to deliver Netflix products to consumers.

But in moving to digital content, Netflix is coming up against a whole new set of hurdles. Sarandos now finds himself locked into a battle with the movie studios, who are clinging to their old model of milking as much revenue as they can from their blockbuster hits by charging cable channels a premium for exclusive rights to show these movies after their theatrical release. As a result, Netflix currently only has about 8,000 films available now for online streaming to PCs, and they are offered simply as a free supplement to customers’ existing DVDs-by-mail plans.

But Sarandos is pushing for a nonexclusive distribution model that would allow the studios to make money off a higher volume of rentals and sales to broadcasters.

“Every successful internet play is about broad access, never exclusivity,” maintains Sarandos, who so far has made successful bids for nonexclusive access to movies like Pan’s Labyrinth and The Good German.

In a similar vein, Sarandos is betting that broadening Netflix’s distribution channels through set-top boxes, videogame consoles, and other devices, will allow its customers to continue using the format wherever they’re comfortable.

“We want the service to be everywhere the internet is,” Sarandos says.

Analysts think Netflix could well force the studios to change their approach by virtue of the company’s sheer size.

“For Netflix, it’s build the presence, build the knowledge, and capability,” says Kurt Scherf, vice president and principal analyst at Park Associates, a consumer research firm based in Dallas. Scherf says that "in the longer term they [Netflix] will have enough reach to broker deals that matter.”

For all the wrangling over the digital future, though, Sarandos acknowledges that mail order will likely continue to be Netflix’s dominant distribution model, at least in the near term.

“We’re all trying to navigate a new business without prematurely killing the old one,” Sarandos says.