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Netflix Chief Executive Officer Reed Hastings speaks during the launch of streaming internet subscription service for movies and TV shows to TVs and computers in Canada at a news conference in Toronto September 22, 2010.

MIKE CASSESE/REUTERS

Video-streaming website Netflix Inc. closed down a Toronto street Wednesday and attracted dozens of onlookers for a splashy launch to promote its highly anticipated foray into Canada.

Problem is, many of those in the crowd were actors who were paid to be there. Many of the "extras" on hand were interviewed by journalists, who didn't realize they weren't real consumers interested in the product.

As a news conference was kicking off to announce Netflix's service - which uses the Internet to stream unlimited access to thousands of movies and TV shows for $7.99 a month - extras were asked to spill into the street and encouraged to "play types, for example, mothers, film buffs, tech geeks, couch potatoes etc."

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"Extras are to behave as members of the public, out and about enjoying their day-to-day life, who happen upon a street event for Netflix and stop by to check it out," reads an information sheet handed out to extras.

"Extras are to look really excited, particularly if asked by media to do any interviews about the prospect of Netflix in Canada."

After word of the ruse spread on Twitter, Netflix apologized and said the extras should not have been talking to reporters.

A Netflix spokesman said the handout for extras was required to obtain a film permit for the launch. The instruction sheet refers to Wednesday's event as a "corporate documentary."

"I was unaware that script was handed out to extras and that was not supposed to happen," said Steve Swasey, vice president of corporate communications for Netflix.

"Some people got carried away and it's embarrassing to Netflix."

Netflix has been hugely popular in the U.S., where the company also sends out DVDs by mail to users, and has attracted more than 15 million subscribers. It's also been credited with dealing a major blow to traditional video stores including Blockbuster, which has been teetering toward bankruptcy.

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But Netflix's success in Canada is not assured, as it will face a number of competitors.

Zip.ca already offers DVD rentals by mail, like Netflix's U.S. service, and has hinted that it will eventually offer online streaming. TV networks also offer free streaming access to current shows, and cable companies are bolstering their on-demand offerings to subscribers.

And much of Netflix's catalogue is made up of older titles and not new releases, which may not appeal to some consumers.

Co-founder and CEO Reed Hastings said Netflix isn't trying to compete directly with those other content providers and feels there's space in the market for its budget-priced service.

"Our focus is providing an incredibly low-cost, high-value option -with a selection of films that are great films from around the world and incredible TV shows - and there's a huge untapped market for that," Hastings said at a news conference.

"We're not an effective competitor to cable because we don't have sports, we don't have the vast majority of programming that cable has - but we have a much lower price point.

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"(To offer) the newest new releases, like within a week of DVD (release), that would be extremely challenging at low price points."

The service currently streams content on PCs, Macs, iPhones and iPads, Nintendo Wii, Sony PlayStation 3 and some Blu-ray players. There are more options on the way, including Xbox 360, Apple TV and Internet-connected TVs.

The DVD by mail option isn't coming to Canada, Hastings said.

"For a while we were focused on DVD ... and as DVD started to peak we realized streaming was really growing, we realized OK, when we enter (Canada) we should do this and be 100 per cent streaming."

A potential problem for Netflix and its streaming strategy lies in how Canadians receive Internet access, and the caps on downloading imposed by providers. In a test by The Canadian Press, a 23-minute "Trailer Park Boys" episode ate up almost 270 megabytes of data, while watching the Lars von Trier film "Antichrist" in high definition downloaded almost 2.9 gigabytes of data for the 108-minute film.

If users exceed download limits, they could face a fee at the end of the month.

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