And get this: Netflix (NFLX) added a net 510,000 subscribers during the period, 95 percent more than in the same three months last year. In fact, in the past year, Netflix has added 2.4 million subscribers, the most it has signed on in its 10-year history.

“Our business momentum is strong and our third-quarter performance keeps us solidly on course for a record 2009,” Netflix CEO Reed Hastings said in a statement.

Given that and the fact that Netflix beat estimates, it’s odd to see investors dragging the company’s shares down. Netflix fell 4.39 percent to 47.45 in after-hours trading.

The online DVD-rental pioneer said Thursday that its second-quarter profit rose 22 percent on revenue of $408.5 million. It earned $32.4 million, or 54 cents a share, easily surpassing Wall Street’s expectations of 50 cents per share.

Netflix’s (NFLX) subscriber base finished the quarter at 10.6 million, up 26 percent year-over-year and at the high end of the company’s own forecasts.

“We continued to execute very well in the second quarter and are on track to deliver a record 2009,” Netflix CEO Reed Hastings said in a statement. “As our subscriber base and disc shipments continue to expand, and as we offer more opportunities to watch instantly via the Internet, we believe we are striking the right balance between growth, investment and earnings.”

It is an extraordinary market play. And an unsettling one. For it seeks to place Google (GOOG), which already collects vast amounts of data about our Internet use, at the very center of our information experience.

The privacy implications are, of course, horrendous. And while Google will inevitably dismiss such concerns as paranoid and argue that any data the company might collect at the OS level will be used only to improve its services and benefit users, it should still give us all pause. Because when it is finally launched, Chrome OS will be yet one more deep well of consumer data to which Google will have access.

There are already quite a few such wells, including Google Search and Chrome, that profile user interests and surfing habits: Gmail, which gives the company access to our email conversations, and Google Voice, which gives the company access to our spoken ones. Add to this Google Street View and Latitude, a service that tracks the physical location of its users, and mobile and desktop operating systems and, well…that kind of consolidation of Internet-based services around a single dominant company should give us all pause.

Lest we forget, Google is in the behavioral targeting business. Why would people ever use an OS developed by a company whose business is based on meticulously recording and analyzing their online behavior? Because they enjoy using its other services, I suppose. But there is a privacy-vs-ease-of-use tradeoff here. And with Chrome OS, it is unprecedented. Further, while Google might tout its “don’t be evil” motto as reason enough to trust the company with our data, there are other entities that don’t always share that sensibility. Remember, it wasn’t so long ago that the federal government tried to force Google to turn over user search data to the Justice Department…

“Competition in the OS market should always be welcome, but Google is the special case,” Marc Rotenberg, executive director of the Electronic Privacy Information Center, told Digital Daily. “It has become dominant across many essential Internet services–search, mail, video, online apps, and advertising. Coupled with Google’s growing profiles of American consumers and reluctance to adopt meaningful privacy safeguards, we expect that antitrust authorities in the US and Europe will view Google’s entry into the OS market with enormous skepticism.”

Jeff Chester, executive director of The Center for Digital Democracy, echoed Rotenberg’s concerns. “Google’s new OS has to be placed under the data collection X-Ray by US and EU privacy regulators and advocates,” he said. “Any expansion into the marketplace by either Google or Microsoft should generate intense scrutiny, especially for the privacy implications. These two are engaged in a global data collections digital arms race, which has far-reaching implications for consumers and their information.”

That’s when Apple (AAPL) is expected to roll out iPhone 3.0, an update that will bring a number of long-anticipated features to the iconic device. Among them: voice memos; a landscape keyboard for Mail, Messages, Notes and Safari; a phone-wide Spotlight Search; push notifications; the long-overdue cut, copy and paste; and MMS and Internet tethering–neither of which is currently supported by AT&T (T).

Let’s hear it for carrier exclusivity!

“We do not intend to file for bankruptcy….We have lots of plans to grow our business.”

– Blockbuster spokesperson Karen Raskopf, March 3, 2009

Blockbuster in a Monday filing told the Securities and Exchange Commission what anyone who’s observed its fast-declining fortunes has known for some time now: The company isn’t sure it can stay in business much longer. In a PricewaterhouseCoopers assessment included as part of its latest 10-K, Blockbuster (BBI) acknowledged that its financial situation raises “substantial doubt about the Company’s ability to continue as a going concern” and said it may have to close its doors if its financial situation doesn’t improve in the near future. Seems that $250 million revolving loan Blockbuster announced last week is conditional, and the video rental chain says there is “no assurance” that it can meet its requirements.

An unfortunate turn of events for Blockbuster, but far from an unexpected one. The company did not fare well in its battle against DVD-by-mail pioneer Netflix (NFLX), and its recent efforts to stay relevant have been head-shakers at best. A $1.3 billion gambit for an electronics chain that would go bankrupt less than a year later? A weak (and costly) set-top box offering that would later be made redundant by a deal with TiVo (TIVO)? A vending-machine program with partner NCR (NCR) that, like its entry into the DVD-by-mail market is late to a game it’s already losing? And all these things conceived and launched amid a challenging macroeconomic environment and constrained capital markets. Sad, really. Hard to imagine that 10 years ago Reed Hastings was doing all that he could to convince Blockbuster to buy Netflix…

If inking a video-on-demand deal with a declining DVR pioneer is one of them… well, that’s not much of a plan, is it? But when your financial statements look like Blockbuster’s, I suppose you cling to life however you can (Blockbuster shares have fallen about 80 percent over the last 12 months). And so, beginning in the second half of 2009, the company will make its Blockbuster On Demand service available to TiVo subscribers. The agreement also calls for Blockbuster’s brick-and-mortar stores to sell TiVo DVRs. “We are excited to be teaming with TiVo, the company that created the DVR, to make Blockbuster’s entertainment content readily available to their millions of subscribers,” said Blockbuster CEO Jim Keyes. “Ultimately, our vision is to work with TiVo so that their subscribers can access movies not only through our On Demand service but also from our stores and through our by-mail service as well.”

For Blockbuster (BBI), the deal is a means of capitalizing on the rising popularity of on-demand video. But to really do that effectively, the company needs alliances with more electronics manufacturers than just TiVo (TIVO). After all, the DVR pioneer isn’t in the greatest of health these days. And Netflix (NLFX) already delivers online video to TiVo and PCs, Macs, Xbox 360s, and selected LG and Samsung Blu-ray players as well. Clearly, Blockbuster is as late to on-demand as it was to DVD-by-mail.

We have recently completed the transition from .Mac to MobileMe. Unfortunately, it was a lot rockier than we had hoped.

Although core services such as Mail, iDisk, Sync, Back to My Mac, and Gallery went relatively smoothly, the new MobileMe web applications had lots of problems initially. Fortunately we have worked through those problems and the web apps are now up and running.

Another snag we have run into is our use of the word “push” in describing everything under the MobileMe umbrella. While all email, contact or calendar changes on the iPhone and the web apps are immediately synced to and from the MobileMe “cloud,” changes made on a PC or Mac take up to 15 minutes to sync with the cloud and your other devices. So even though things are indeed instantly pushed to and from your iPhone and the web apps today, we are going to stop using the word “push” until it is near-instant on PCs and Macs, too.

We want to apologize to our loyal customers and express our appreciation for their patience by giving all current subscribers an automatic 30-day extension to their MobileMe subscription free of charge. Your extension will be reflected in your account settings within the next few weeks.

We hope you enjoy your new suite of web applications at me.com, in addition to keeping your iPhone and iPod touch wirelessly in sync with these new web applications and your Mac or PC.”

Thank you,

The MobileMe Team

Last week he dismissed Facebook as another GeoCities. Now he’s gone and branded Google as Big Brother.

“Our Windows Live Hotmail, in and of itself, doesn’t generate much ad revenue,” Ballmer told an audience at the Microsoft Startup Accelerator Program in the United Kingdom. “So we’ve had to put, essentially, a whole portal around it because the traffic around it is very valuable but it’s not very easily monetized in the context of mail. Google’s had the same experience, even though they read your mail and we don’t. That’s just a factual statement, not even to be pejorative. The theory was if we read your mail, if somebody read your mail, they would know what to talk to you about. It’s not working out as brilliantly as the concept was laid out.”