Blockbuster and Netflix have different visions of how the residential movie distribution business works in the physical world. Blockbuster relies on rentals from its brick-and-mortar stores and customers pay for each title they watch, while Netflix customers pay as little as $5 a month for as many DVDs as they want to watch.

Even so, the two companies are moving their warring business models online. Netflix has offered subscribers unlimited streaming at no extra charge to computers for some time, also providing the service on TiVos, the Xbox 360 and a $99 dedicated Netflix box from Roku. Meanwhile, Blockbuster is partnering with 2Wire, which will provide an Internet-connected set top box to provide online movie rentals.

The 2Wire MediaPoint will also cost $99, but comes with a credit for 25 movies, meaning the hardware effectively is free. After the initial credit is used, customers will pay for each rental with prices starting at $1.99 for older titles.

Of course, as it is usual for online rentals, customers can watch a title within 30 days of renting it, but the rental expires 24 hours after it is played. Even if it looks like a fight between the subscription and the online rental, it’s not the case, due to restrictions imposed by the studios. The Netflix streaming catalog of about 12,000 titles is weighted heavily toward older titles and relatively obscure independents and foreign films, while Blockbuster gets new movies in the online rental window, which provides for a much greater availability of current titles, but fewer classics.

Blockbuster’s service is called Blockbuster OnDemand, and it will be available beginning on Tuesday. As for Netflix’s Roku set-top box, for example, it will be launched in May next year.