Digital licensing remains a problem.

Online rental service Netflix will not be offering movie downloads on its Web site this year due to difficulty in making a wide range of content available, the company said this week.

In its Oct. 19 quarterly conference call, Netflix said that licensing agreements are also proving to be a big hurdle.

The company said its subscriber adoption rate in the third quarter increased 61% year-on-year, bringing its total membership to 3.6 million. Revenue increased 23% in the third quarter to $174.3 million.

Total quarterly earnings dropped 62% year-on-year to $6.9 million, however, due to an increase in marketing costs and litigation costs stemming from a class-action suit alleging false advertising and breach of contract relating to DVD delivery. The company has rejected the basis of this claim publicly.

Looking ahead, Netflix says that between 4 million and 4.2 million subscribers will have signed up for its service by year's end. It expects net income by the end of the year at $4 million-$7.5 million.