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OnLive plans to expand its online game service next year to include movie streaming, according to the Wall Street Journal.

If OnLive does so, it could bring new competition to movie streaming leader Netflix and add a second leg to its business model, which has been focused on games so far.

Steve Perlman, chief executive of Palo Alto, Calif.-based OnLive, said in an interview with the Wall Street Journal that his company will offer movies next year through a subscription service and other pricing schemes. OnLive’s major investors include Time Warner’s Warner Bros. movie studio. Perlman said the entertainment companies want more choices for digital movie distribution because they fear that current leader Netflix may become too powerful.

OnLive already uses its server and compression technology to stream games to users. Instead of loading games onto PCs or consoles, OnLive runs them on servers in data centers. It uses compression to send the game visuals down to the user at high speeds. The user can then play high-end games with outstanding 3D graphics on a low-end computer or, using a $99 OnLive MicroConsole, on a TV without an expensive game console.

It’s no secret that the same OnLive technology could be used to stream movies. OnLive just has to ink deals with the studios to make it happen and make sure that its network can handle the load. If OnLive launches its movie streaming business, it could package it with its gaming business. That would bring it into competition with a new round of players, including Netflix and Comcast.

Vizio also plans to offer video subscription services through its TVs, according to the Wall Street Journal.

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