The itunes model works, though it may be too heavily balanced in favor of iTunes. Content owners get up to 70% of the fee, 30% goes to iTunes for delivering it. Content onwers in this case could be shared, e.g. production company gets some and “US distributor rights” gets some, depending on the deal they struck originally.
At some point something close to standard will emerge and then it won’t matter who is providing the content, the content owners will be happy knowing they get the cut whether sold on Netflix, Google, Hulu, Itunes, NBC, Amazon, Comcast, Time Warner etc etc etc.
What the owners need to work on is how to keep the audience interested when so much on demand is available. It becomes a marketing challenge. They won’t want to break the model of Theatrical Release, as that is where the most noise is made, and the costs recently incurred and they want to recoup it Selling a movie 10 years after it is released out is a different economic model, and iTunes actually showed music people how to make more money by abandoning the previous line pricing, and allowing singles to sell from as much as $2 to as low as 39 cents, when previously it was all $1 a song and $9.99 an album.
Content owners will be able to determine how much to charge, and Netflix will be able to offer first run or second run movies for an upcharge. Older content will be sold in a licensed package.
That model doesn’t work for Netflix because they charge a flat monthly fee, and with that flat monthly fee the users could watch nothing or hundreds of things. Trying to figure out who gets how much of an iTunes style cut up would be impossible. And also the iTunes revenue stream is drying up, it worked for a while but it’s suffering from the same malaise as the rest of the music industry now.