Facebook: The Future of Online Video Rentals?


Users have become increasingly comfortable with Facebook as a place to watch videos, catapulting the social network into the top 10 video destinations on the web in the U.S. But will they also pay for movies from big time studios?

That question might soon be answered, as Warner Bros. (s TWX) has made The Dark Knight available to Facebook users as a low-cost rental directly through the social networking site. As first reported by The Hollywood Reporter, the movie can be rented for 30 Facebook credits, or approximately $3. Users who pay for the rental will have 48 hours after purchase to watch the movie, which can be paused, resumed and displayed in full screen mode. The Facebook implementation also has all the social hooks one might expect from the site: Users can like, comment on and share the movie with their friends from directly within the Facebook app.

For Warner Bros., the decision to rent The Dark Knight online is just one more in a series of experimental moves that the studio has made in recent weeks. It also made the second film in the Batman franchise available as an app purchase on the iOS platform, along with last year’s blockbuster hit Inception. That distribution strategy — releasing films as apps — was done in part as a way to reach movie fans in markets in which Apple’s (s AAPL) iTunes movie store is not available.

In many ways, The Dark Knight is the perfect film with which to launch these kinds of tests. The vast majority of consumers who would have bought the movie on DVD or Blu-ray will have already done so, but it still has tons of fans that might enjoy watching it again, even if they don’t actually own it. Making the movie available as a low-cost rental can only add incremental value from a potentially untapped market.

The usage of Facebook credits as currency also, like the iTunes implementation, has the ability to open up rentals in markets where mature on-demand online video libraries might not exist. As a global network, Facebook gives studios like Warner Bros. the opportunity to reach an audience that it might not have tapped otherwise.

That said, we’re skeptical that Facebook will become a large-scale video rental opportunity for studios based on the current implementation. Users who want to watch The Dark Knight have to go to the film’s official Facebook page in order to click through to the actual film rental. In other words, they have to know what they’re looking for — and have their account set up to pay with Facebook credits — in order to take advantage of the offer. Even for a movie that has nearly 4 million Facebook fans, that seems like a cumbersome process.

At the same time, there are user adoption issues with making online rentals available through non-traditional channels, and we’ve seen other huge online destinations fail to make much of a dent in the online VOD space. Take, for example, YouTube (s GOOG). Despite having a massive audience of online video viewers, its rental store has failed to gain much traction with actual users.

Granted, YouTube never had a hit as big as The Dark Knight for its viewers to watch. But if a huge, global video site like YouTube can’t build a business from online rentals, it’s difficult to see Facebook being able to pull it off. That said, even if it isn’t a big hit, the Warner Bros. Facebook experiment is likely to teach the studio about how it can better use social tools to profit off digital distribution of its films.

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Sunil Gunderia

Thank you Ryan Lawler and GigaOm for taking a non-sensational view of a WB trial of the rental of Dark Knight on FB. I have been stunned at the knee jerk reaction to this trial across the blogsphere and could not understand what I was missing. For example, here is a headline from Marketwatch:

Facebook–Warner Bros. deal hits Netflix shares
Social-networking service to stream movies from Hollywood studio

To be clear there is no deal per se between WB and FB for a film service. Rather, WB is leveraging FB payment mechanism to offer Dark Knight for rental through its FB fan site. This is an important distinction as FB is in no way currently acting as an aggregator/re-seller of films. Further, FB is not streaming the films, WB is. The social commerce platform and customer service is being handled by Milyoni who WB has partnered with for the rental of this film. See http://bit.ly/eDPOOd.

As you have rightly pointed out WB has been conducting trials for catalog product and for DK in particular. The trial with FB appears to be an extension of the same strategy that WB has done on Apple for the film apps. I would expect this to continue to other platforms as WB and other studios look for ubiquitous digital distribution of content to curb piracy and increase digital sales to stem the decline from physical media sales. Perhaps this is a part of a greater scheme of access points for DECE’s UltraViolet initiative that WB is a part of.

It shocks me that this trial on FB has had any impact on the Netflix stock. VOD rental is readily available on the web and is a completely different business proposition from the hybrid physical/digital subscription product that Netflix offers. Further, do Netflix investors not realize that there will be continuing competition and increased distribution? I would have expected the pricing of the stock to already reflect the likelihood that google, ebay (paypal), microsoft, sony, and a myriad of smaller companies to launch competitive services.

I do think it is interesting for studios in the long run to offer a rental/ownership product through facebook. They are already investing marketing dollars building fans on FB during the theatrical window so it seems very efficient to try to convert those fans into buyers of their product during the home entertainment window.

Will be interesting to see how this story develops.


“This is an important distinction as FB is in no way currently acting as an aggregator/re-seller of films. ”

Not yet anyway.

Interesting commentary. I respectfully disagree with your comments on the reaction with Netflix stock. I would agree that investors should be well aware that competition is coming, and probably from the names you mention. But that seems like a distant possible threat, vs someone with just as much scale (FB) running an actual trial.

Netflix physical distribution is becoming less and less of their business. If the names you mention get into IP distribution, then where do companies differentiate ? My guess would be UI and Social. Apple will win on UI, FB could easily compete on Social. If you believe thats coming, then I dont see how Netflix keeps up.

For me, I’m a little more interested in FB’s strategy here than WB’s.


I don’t know about rentals but I think live broadcasting would be a hit. Think about a soccer world cup game broadcasted live and the ability of users/friends to comment players actions. It would be great.

Michael S.

As I said on Twitter, I’m not so sure about this. It’ll definitely be an interesting experiment and, like you said, will help WB learn how it can better adapt to the social tools/media available to it. I actually just navigated there to see what’s going on with the page and where it wants me to purchase the rental I get a message that says “Sorry, but this state or region isn’t supported.” Apparently WB doesn’t like Colorado.

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