Lights Out Netflix? Facebook (And Its 600 Million Users) Enters "Zero Barriers To Entry" Video Streaming Market

Tyler Durden's picture

Has anyone seen the latest Whitney Tilson NFLX reshort memo? Because if the news that Facebook and its 600 million registered users is entering the video streaming market is true, and it appears to be, the "value inventor" should promptly forget that he topticked the market with his short cover a few weeks back, swallow his pride and actually make money. As for Netflix, the world's most ridiculous zero barriers to entry business model is about to realize why most SWOT analyses typically at least cast a casual glance at said barriers to entry. Because when there are none, you can go from hero to zero in a like amount of time. All Things Digital reports: "The social media giant is taking its first step to connect you with
movies and TV shows, while collecting a fee in the process. It’s going
to let users rent movies directly from the site, using Facebook Credits
to pay for the transaction. First up is “The Dark Knight”, from Time Warner’s Warner Bros.. It will
cost 30 credits, or $3, for a 48-hour rental, via an app the studio has
built for the site. More movies, along with the ability to purchase the
titles outright, are coming." And so, the race to the bottom in Netflix margins begins. Next up: we repeat our prediction that NFLX will be forced to come to market with an equity offering, which will promptly cut the value of the world's most overpriced stock by at least 33%.


Warner Bros. describes the rental as a test, but there’s no reason this shouldn’t work. Facebook has 600 million registered users, and courtesy of Zynga and other social games, a big chunk of them are already using the site’s virtual currency. Easy to connect the dots here.

Just as important: While other video sites are trying to figure out how to add social “hooks” into their experience, Facebook doesn’t have that problem. It is the social hook.

The only odd thing about this combination is that it’s taken this long to come about. Facebook is either the 2nd or 6th-biggest video site in the U.S., depending on who’s counting. And that’s without the benefit of any Hollywood hook-up at all: Just the clips you and your pals put up.

So just imagine what could happen if Mark Zuckerberg and the big studios decide they’re really serious about making this thing work.

And from the Press Release:




BURBANK, CALIF., March 8, 2011 – Warner Bros. Digital Distribution (WBDD), a market leader in video-on-demand and electronic sell-through, today announced it will begin testing an offering of selected movies for purchase or rental through Warner Bros. Entertainment’s Facebook movie Pages.  Consumers will be able to use Facebook Credits to easily buy or rent a title, all while staying connected to Facebook.

Starting today, millions of fans who “Liked” Christopher Nolan’s blockbuster film “The Dark Knight” can rent the title through its official Facebook Page (  Consumers simply click on the “rent” icon to apply their Facebook Credits, and within seconds they will begin enjoying the film.  The cost per rental is 30 Facebook Credits or $3.  This offering is presently available only to consumers in the United States.  Additional titles will be made available for rental and purchase on a regular basis over the coming months.

“Facebook has become a daily destination for hundreds of millions of people,” said Thomas Gewecke, President of Warner Bros. Digital Distribution.  “Making our films available through Facebook is a natural extension of our digital distribution efforts.  It gives consumers a simple, convenient way to access and enjoy our films through the world’s largest social network.”

Fans will have full control over the film while watching it through their Facebook account for up to 48 hours from purchase.  They can choose to watch it in full screen, pause the movie, and resume playing it when they log back into Facebook.  Consumers will also have full Facebook functionality including the ability to post comments on the movie, interact with friends and update their status.

h/t Eric

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Sudden Debt's picture

I still don't understand why you pay for movies you watch online....




Sudden Debt's picture

ps: alt.binaries.bitchez also contains movies but they are more for the adult spectator :)

plocequ1's picture

Newgroups is where its at

PuppetRepubl1c's picture

the first rule of newsgroups is you do not talk about newsgroups


mynhair's picture

Quiet, potato-head.  Yer giving out secrets.

Sudden Debt's picture



JonTurk's picture

because they are american

pointer's picture

why don't people just stop watching the bullshit produced by Hollywood - it contributes to the mass brainwashing - no wonder Facebook is on top of it.

Hollywood is a key player in the conditioning of society.

Why are a lot of the movies about stealing Federal Reserve Notes - to help with the illusion that paper fiat money is worth killing for.

People are conditioned without even realizing it - QUIT WATCHING THEIR GARBAGE!

Careless Whisper's picture

Do Facebook Credits hold their value better than the Dollar?

Sudden Debt's picture


It's as good as gold!

monopoly's picture

Gonna get interesting.

dark pools of soros's picture

you guys act like sheep.  no one is going to pay per movie on facebook..  are they ready to penny up for real content and beef up for the traffic a subscription based model will need??


no - they love to give you crap make believe junk and charge you for every pixel


A big player will buy netflix at somepoint (apple, microsoft, sony?)





gordengeko's picture

Netflix puts anyone?

Sudden Debt's picture

can I trade them for blockbuster stocks? now where did I put those...


gordengeko's picture

Was actually wanting to buy a redbox a few years ago but you can't.  that sux!

BorisTheBlade's picture

Netflix, Facebook, bloody dinosaurs. Torrents b*tches.

dark pools of soros's picture

yeah keep thinking that is more than .001 of the market doing that - you add so much to this discussion

BorisTheBlade's picture

i missed something, which discussion? in any case, comment was sacrastic, since torrents are not even video streaming technology.

tmosley's picture

Why on Earth would someone pay $3 for a movie you could rent at Redbox for $1?  

Sounds more like they are competing with defunct Blockbuster than Netflix.

If they want to compete with Netflix, they are going to have to get a huge library of movies and offer unlimited streaming for a low monthly fee, not utilize this arbitrary "rental" model.

Sudden Debt's picture

you're looking to it all wrong.



malikai's picture

I was thinking the same thing. $3/48hr of 1 movie seems an awful lot. But I'm sure they'll figure that out sooner or later. Isn't NFLX like $20 or something a month for 3 dvds at a time for a whole month?

tmosley's picture

Or $9/month for one movie at a time + unlimited streaming.

AndrewJackson's picture

"Why on Earth would someone pay $3 for a movie you could rent at Redbox for $1? "

Don't worry prices will continue to collapse, but right now Redbox just doesn't offer that much in terms of selection. You can only get whats in that one particular machine. Plus, you have to drive to a kiosk ($ 4-5 gas doesn't make that very attractive + it just isn't convenient).  Thus, paying $ 3 bucks / for a recent movie with high demand is not that bad. Especially when you are doing it from your living room etc.

The reason this is competing against netflix is because their selection is downright terrible. You can not watch any recent movies on there, period! Once prices drop on premium download rentals ($ 1-2) range, netflix is toast. Most people never watch more than 4-5 movies a month and a small price drop of around 33% would easily justify the switch. 

aerojet's picture

Actually, you can have movies delivered to a particular Redbox, and you can search online for what movies are available at which site.  I don't know where you live, but I can walk to two different RedBoxes (or whatever each one is called), and there are probably twenty more within about five minutes drive.  Redbox has taken my area by storm.  The Blcokbuster that was two blocks away is dead and gone (along with the Starbucks, Caribou kicked its ass).

I had Netflix for about a year when it first hit the scene. I found I do not watch enough movies to justify the (albeit meager) cost.  RedBox is like the prepaid cellphone service of movie rentals.  Very casual.


tmosley's picture

Precisely.  I pass no fewer than three Redboxes on my way home from work, and I live in a very rural area.

Further, the $3 price point is exactly the same as the already established iTunes movie store.  You can rent it for $3 there too, along with a million other titles.  I don't know why anyone thinks that a single movie available over Facebook is such a game changer.  If they were charging $1, then I would agree, but they haven't added ANYTHING to the market with this.

Samuel Morales Jr.'s picture

Redbox is taking over. You can ride your bike to get the movies. It ain't like movies are heavy to carry. Plus Redbox is conveniently located in shopping areas like grocery stores as well. Redbox is also old school, because it is visible to the shopper, those not computer savy, or know how to use a computer/internet, and those who do. You don't need expensive broadband to see the movies as well. When you need broadband to see a movie, you are actually paying a lot more than simply going to a box, and selecting movies from it, then it machine dispenses it. Redbox is here to stay I am afraid. This idea we can just consume things over the internet has been blown over before.

anthoxanthum's picture

They're counting on the branding hype to offset the inflated price and it will work. But Netflix isn't going anywhere due to this. Nor will Redbox lose any customers. This looks targeted at iPad/iPhone types that believe Facebook is a gift from Xenu to change the face of the universe as we know it. /eyeroll

Rogerwilco's picture

Karl Denninger just wet himself.

aerojet's picture

That dude is a total asshat.

SilverRhino's picture

I used to listen and read his site.  Then I found ZH and also realized that he's a douche about PM's.  

He's too wrapped up in blind obedience to the law and government to realize that people will NOT comply with a PM's confiscation order.  

TruthInSunshine's picture

Netflix is thinking of moving into the (for now) less competitive cassette tape rental business.

UninterestedObserver's picture

Things like "barriers to entry","margin compression" and "competition" are from the now defunct school of fundamental analysis - here in the new American ponzi market all you need to do is step right up buy some stocks and you are off to the races (against inflation)

Josh Randall's picture

Facebook still doesn't impress me - they keep throwing $hit against the wall hoping somthing will stick so they can add on to their flawed business model. It is a great Free Program that should be supported by ads; but whenever they try and add costs or a menu of play to play services on to consumers it will flop like the maginot line

Mercury's picture

Yeah but eventually they will know close to everything about everybody and that's worth money to someone.  Soon they'll have a massive database on your video viewing habits.

Just wait until you need a Facebook account to do things that shouldn't have anything to do with Facebook - just like you need a driver's licence in many states to do things that have nothing to do with driving.  Explaining to a potental employer why you don't have a Facebook account might become a lot like explaining that although your criminal record is sealed, you don't have anything to hide.

aerojet's picture

It's the AOL of this decade.  It will die, give it time.

Saxxon's picture

+1 Aerojet. Yawning at it all...

dark pools of soros's picture

AOL actually provided a service..  not just a scrapbook gossip fence

gosh's picture

Let's sum up the competition:

1.  Blockbuster coming out of bankruptcy with less debt, renewed focus

2.  Redbox to offer streaming movies

3.  Amazon offering free movie streaming to their members

4.  Hulu

5.  Facebook

6.  Comcast also said today they will compete with netflix


All bubbles burst when growth declines.  Growth declines with competition.  Im shorting netflix, thinking of adding to my position.  When a bubble bursts it can go down 80-90% in a year or so.

Azannoth's picture

Apple should resurect their 'Apple TV' on the IPad

dark pools of soros's picture

that space is ripe for M&A  -  don't think bids aren't being considered in the big boys war rooms

Azannoth's picture

NTFX is priced like it was a total monopoly (Microsoft style) and held that spot forever

Waterfallsparkles's picture

My guess would be that they will try to blow the shorts out of the Market first.

Old Wall Street trick.  When bad news comes out, run the stock into the stratisphere.

Blow the shorts out of the Market and then take it down.

RobotTrader's picture

NFLX gapping well below its trend line.

Looks like the party is "ovahh" on this one.

The Axe's picture

NFLX   finish.....rats leaving the ship....only if they had porn I could download...then I buy some

Al89's picture

I type in <movie name> stagevu into Google search. I watch whichever film I want to watch in DVD quality for free.

If that doesn't work I check youku, zshare, megavideo (free service).

If people can't instantly stream for free in DVD quality they download it, in DVD quality.

All while saving much needed $$.


Azannoth's picture

It's called Pirating and your IP is '' ;)