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:
WARNER BROS. ENTERTAINMENT BECOMES FIRST HOLLYWOOD STUDIO TO OFFER MOVIES DIRECTLY ON FACEBOOK®
MILLIONS OF WARNER BROS. FACEBOOK FANS CAN NOW RENT MOVIES USING FACEBOOK CREDITS AND STREAM WITHIN STUDIO’S MOVIE FAN PAGES
PROGRAM WILL EXPAND TO DIGITAL MOVIE PURCHASES IN THE NEAR FUTURE
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 (http://www.facebook.com/darkknight). 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.