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Summary:

It wasn’t that long ago that Jim Cramer was suggesting that Facebook could actually help Netflix’s stock. But this morning, news of a deal b…

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It wasn’t that long ago that Jim Cramer was suggesting that Facebook could actually help Netflix’s stock. But this morning, news of a deal between the social network and Warner Bros. (NYSE: TWX) to make The Dark Knight available for streaming has hurt Netflix (NSDQ: NFLX) much the way Amazon (NSDQ: AMZN) did with the announcement of its own streaming service last month.

That Netflix dropped 4 percent in early Tuesday trading is a testament to how deeply held fears have been all along that the streaming service was bound to be battered by competitors sooner or later. At least when Amazon came along, the fear seemed well grounded; there was little question this was a company that was clearly responding to Netflix with a full-fledged rival product that had the scale and ambition to be a real competitor.

As far as Facebook goes, neither the social network nor Warner Bros. has said what is going on here beyond a one-title experiment that allows for rental or purchase of the film. Nevertheless, even the faintest sign of crowding in on Netflix’s territory, even when it’s an a la carte offering vs. Netflix’s subscription model, has triggered deep worry. Thus, Netflix’s gravity-defying stock is finally feeling mortal again.

For Warner Bros., the Facebook move is not unlike the innovative distribution experiment it launched last month with Apple (NSDQ: AAPL) for an app-based film offering. As sales of physical discs decline, studios have to get aggressive about seeding the internet with transactional opportunities wherever consumers are truly active, and an app or a social network could prove in the long haul to be just as compelling a purchase environment than standalone marketplaces like iTunes or Netflix.

What the Knight experiment really puts to the test is how conducive social networks are to e-commerce. Just because Facebook users spend tons of time interacting with each other doesn’t necessarily mean that long-form content consumption is a natural extension of the social-networking experience as, say, gaming experiences like Farmville or Zynga Of course, Facebook has been so successful at monetizing its platform that it couldn’t hurt to try.

  1. All new ways to get great content through the Web will drive adoption of this type of delivery – so the market will grow (physical ways of delivery shrink). Netflix itself will win through Facebook but this doesn’t prevent stock price to get under pressure as analysts not always understand the fundamentals.

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  2. so the market will grow (physical ways of delivery shrink). Netflix itself will win through Facebook but this doesn’t prevent stock price

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  3. bigger picture = NFLX down 25% in just one month

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  4. Kevin, it doesn’t matter that NFLX has been down. Most people are just talking and speculators are united with Hollywood to stop NFLX. However, once people realized that NFLX has an option for $2 more a month to rent up to 60 NEW MOVIES. So for a total of 9US$ you get a subscription plus, let’s say, an average of 20 new movies. That would come out to be .40 US$/movie versus 3 USD for FB. Or put it in a different light: With FB you would pay a whole bunch of 60US$ and wouldn’t have a subscription. Who wants to pay 60US$ to watch 20 movies a month? NOBODY. So you want 2 or 3 streamed to you at FB, OK then, pay $9USD and that would have covered your 20 NEW movies + 24/7 video streaming at NFLX. So, please don’t think people are stupid. The ones who watch movies know simple arithmetic.

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