SANTA CLARA, Calif. -- Sonic Solutions CEO Dave Habiger believes his big gamble is about to catch fire.

Sonic makes popular CD- and DVD-burning software Roxio Creator, which dominates its market. But Habiger believes that business is a tiny flicker of a flame, compared with what he sees as the company's big future: providing software for electronic delivery of movies to digital devices and selling and renting the movies online via its Roxio CinemaNow service.

"We have spent the last four years with the bulk of our resources going into this new format," he says. "And it's finally coming to fruition."

Sonic also makes professional tools for Hollywood to produce DVD and Blu-ray discs. As the company prepared for a transition from DVD to Blu-ray, it ended up concluding that the business as we know it of renting and selling DVDs -- think Netflix, Blockbuster, the corner video store -- is poised for an exit. Habiger believes the time has finally come for movies to be delivered via the Internet to a slew of devices including TVs, cellphones and ultraportable computers known as netbooks.

"The notion that right now, there's some plastic pellets ... that are being shipped to a plant in Taiwan, and they're going to be melted and pressed into a disc, and a movie will be put on that, and that disc will be shipped back to the U.S. ... that model doesn't make sense anymore," he says.

For decades, Hollywood has salivated at the notion of saving on manufacturing and distribution costs by going directly to the consumer with video on demand (VOD), but it's been a slow process. Originally, the thought was that cable and satellite systems would build robust systems that would rival any video store.

While many operators have stronger video-on-demand selections today, most don't come near the offerings of online stores such as Netflix, Amazon or Apple, which are pushing their on-demand ambitions with sales of set-top boxes that consumers plug into a TV.

'Connected' Blu-ray players

Sonic is playing both sides of the field. It has partnered with Taiwan electronics giant LG on a new type of "connected" Blu-ray player. You can watch high-definition Blu-ray movies on disc, but if you connect to the Internet, you can also view Internet-delivered movies from Roxio CinemaNow (at $3.99 a pop) or Netflix. You can access YouTube videos as well.

LG introduced two models in May, rival Samsung has two, and many more are expected by the end of the year, along with TVs that can receive preloaded Internet channels, such as CinemaNow -- or Blockbuster's online channel, which is run by CinemaNow.