After a spasm of irrational exuberance pushed shares of Netflix to new highs over the past few weeks investors abruptly reversed course late Monday, hammering the shares in after-hours trading after the company's Q1 earnings report included lower-than-hoped for guidance for the rest of the year. After officially closing up almost 2% on the day, the shares plunged more than 14% in the after-hours market, losing $5.52 a piece. The company shaved 1 cent off the upper end of its projected full-year EPS to $1.29, quickly deflating a bubble of expectation that had lifted the shares by nearly 50% over the past year.

New York - Broadband provider Verizon (NYSE: VZ) will not be policing its own network for illegal filesharing and reports that a recent test it conducted revealed that the new P4P protocol provides a significant boost in download performance while simultaneously reducing network congestion.

Hampshire, UK – Juniper Research has released a report saying that increased 3G penetration and made-for-mobile content will create $47.5 billion in revenue by 2010.  According to the report, however, improvement in three factors are key in making that happen: 1) User interface; 2) Network coverage; and 3) the High cost of data services.

In its fifth round of funding, which included both old and new investors, mobile content retailer Thumbplay has received $18 million. According to MocoNews, the round included Softbank Capital, i-Hatch Ventures, and Verizon.

San Francisco - Microsoft (NASD: MSFT) is not in talks to include Sony (NYSE: SNE) Blu-ray high-definition DVD technology in its Xbox 360 video game console, according to Aaron Greenberg, group product manager for Xbox 360. Microsoft will, instead, continue to invest in the Xbox Live online service, which lets users rent movies, including ones in high-definition, over the Internet.

I'll say this for the folks at New Medium Enterprises: They're nothing if not persistent. The British company has continued to put out press releases and pester reporters for years with tales of imminent developments and breakthroughs for its red-laser based HD VMD disc format despite few of its promises actually being borne out. And yet the company refuses to give up, recently going so far as to hire Michael Solomon, a well-regarded TV industry veteran, as its new chairman to try, once again, to attract interest in the format from U.S. program suppliers.

The Oscar-nominated actor Heath Ledger, 28, was found dead on Tuesday in his New York City apartment. The police said drugs may have been a factor, since pills that appear to be over-the-counter sleeping medication were found near his body.

Thanks to a new unauthorized biography by Andrew Morton, Tom Cruise’s belief in Scientology has been the focus of many recent headlines. Last week, videos appeared online with Tom Cruise discussing his beliefs and work as a Scientologist, which quickly captured the interest of many Internet users. While the video was removed from YouTube and many websites, Gawker Media eventually hosted a copy which quickly translated into an increase in traffic from the curious public.

Apple (NSDQ: AAPL) CEO Steve Jobs unveiled a super-slim new laptop Tuesday, MacBook Air, as well as movie rentals on iTunes in his much anticipated keynote at MacWorld. However, investors were not impressed and sent the stock down 4.3 percent at of 10.40 am PST.

Big news this morning: Sony BMG (NYSE: SNE), the company that became infamous for spearheading DRM music through installing software on consumers’ computers that made them vulnerable to viruses, is about to throw in the towel on DRM, according to Businessweek. It’s a small step for Sony BMG towards reconciliation with all the music consumers they have pissed off though the years. However, with all four big record labels now proclaiming that they are going DRM-free, it’s a giant leap towards building a new business that makes sense in a digital world.

Hong Kong – With nearly 20% of the world’s population and one of the fastest growing economies, China’s decision today to restrict internet video to state-run companies is sure to have a large impact on the strategic thinking of digital media content providers everywhere. The AP reports that the new regulations will begin on January 31, and were approved by the State Administration of Radio, Film, and Television, and the Ministry of Information Industry.

Peter Jackson and New Line Cinema (NYSE: TWX) finally reached an agreement to make J.R.R. Tolkien's "The Hobbit," a prequel to the blockbuster trilogy "The Lord of the Rings." While it appears that the parties have settled their longtime blood fued over Lord of the Rings' royalties, the announcement today is that Jackson will NOT direct "The Hobbit", but serve as "Executive Producer" together with his on- and offscreen partner Fran Walsh. So how significant is that little detail?

After worldwide box office sales of almost $3 billion for the trilogy of The Lord of the Rings, it’s unthinkable that anyone other than Peter Jackson, director of the films, could be involved in a project for The Hobbit, JRR Tolkien's original adventures in Middle Earth. But after a spat between Jackson and New Line Cinema threatened to derail the film, AP reports the Kiwi filmmaker has agreed to executive produce The Hobbit, with a director yet to be named.