BSkyB is to launch an internet television service to take on rivals such as Netflix, LoveFilm and YouView.
The service will launch in the first half of this year, around the time when YouView is due to hit the market, and will give customers the chance to pay for downloading films without a contract or satellite dish.
Sport and entertainment are due to be added to the offering soon afterwards.
Sky is facing increased competition in the home entertainment sector following the successful UK launch of Netflix, which allows consumers to pay to download films, and rental and download rival LoveFilm.
The service will be aimed at the 13m UK households who do not subscribe to pay-TV.
Also on the horizon is the much-delayed YouView, which gives viewers catchup and on-demand programmes and recording facilities via an internet-connected set-top box and is backed by the BBC, ITV, Channel 4, Channel 5, BT, Talk Talk and Arqiva.
The BSkyB chief executive Jeremy Darroch denied that the business was threatened by the growth of online businesses such as Netflix and LoveFilm.
He added: "I don't see it threatening our business at all. It's further evidence that this is an exciting market and lots of people see opportunities in it.
"We have competed in the last few decades against all competitors."
Sky said the new service will allow customers to pay to watch its content on devices connected to the internet, including PCs, laptops, smartphones, games consoles and TVs.
It will allow customers to choose whether to pay monthly, or rent a movie on a pay-as-you-go basis, it added.
The new service will be available to non-subscribers via different packages. These include a monthly payment for unlimited access to Sky Movies, or viewers can rent a single film on a simple, pay-as-you-go basis.
Sky has offered VoD since 2006, but only to existing subscribers to its pay-TV service. It was the first UK broadcaster to offer content to download over the internet to its subscribers and the service is now known as Sky Go, which will remain as a bonus addition for existing customers.
It is not yet known what Sky's new non-subscriber internet TV service will be called.
BSkyB announced yesterday that the BBC iPlayer and ITV Player TV catchup services are to be available to its subscribers for the first time via the Sky Anytime+ video-on-demand offering.
Sky's new venture comes as it announced a slowdown in the number of subscribers signing up to its television services in the three months to 31 December.
The figure was 40,000, down from 140,000 during the same period the previous year.
But existing customers bought more broadband and telephone packages and underlying profits grew 15% to a record £601m in the six months to 31 December.
Revenues were up to £3.4bn, a rise of 6%, and Sky also announced it is creating 1,300 jobs over the next two years in the UK and Ireland.
Net profit was 8% higher in the first half of the company's financial year despite a drop in advertising revenue.
For the six months ending 31 December 2011, BSkyB reported a net profit of £441m, up from £407m a year earlier. Gains in total customers and efficiency made up for a 6% decrease in advertising revenue.
BSkyB raised its customer total by 321,000 in the period, while subscriptions to various products, notably broadband and telephone, increased by 772,000.
Directors authorised a dividend of 9.2p per share for the period, up 5% from the previous year.