Questioning why we need Hollywood (idea for Netflix)

I am no lawyer by any means but I honestly dont understand why Netflix "needs" Hollywood to get any streaming done at all. Take the competitor Red Box for example. They buy all of their DVD's from retail and Hollywood can't touch them legally or their profits (much to the anger of Hollywood). So the question remains why does any company need Hollywood's permission to do anything?

So here is what I propose:
Netflix buys a certain number of DVD's, lets say 10k (I have no idea how much they actually buy of one movie). Lets then say that they get a recording of the movie for streaming purposes without Hollywood's help and without breaking the encryption on the DVD (the key part to this idea). (Ripping it through the analog interface of say a VGI connector would not be great quality but we're talking streaming here so quality is not going to match the DVD to begin with) They then stream the movie to ONLY 10k people at a time (the other key part). Put another way, you are basically renting a digital copy of the movie. Fair use guidelines currently allow us to make backups of things and also allow us to stream those digital back ups from one device to another. This way Netflix gets leverage over Hollywood and forces them to negotiate with Netflix since this way they don't need Hollywood to stream things. But because Netflix can only stream to the # of people that they have DVD's for they will have to implement a queue system for new releases. So the queue reserves the digital for you to watch until you and when you do the next person in the queue can stream it. Very simple. (and then I get to stream New Releases and the entire Netflix catalog of DVDs!) Win-Win!