Facebook, YouTube Eye Netflix, Amazon.com Web Video Turf

By Clint Boulton  |  Posted 2011-03-13

Facebook, YouTube Eye Netflix, Amazon.com Web Video Turf

Facebook and Google's YouTube unit last week served notice to streaming video powers Netflix and Amazon.com that they have taken a serious interest in the intersection of the Internet and films.

Facebook shocked the tech world March 8 when it announced in conjunction with Warner Bros. that it will begin offering some movies for purchase or rental through Warner Bros. Facebook movie Pages. 

Consumers will be able to pay 30 Facebook Credits, equivalent to $3, for a 48-hour rental to watch "The Dark Knight" through an app the studio has built for the site.

Consumers may watch the film in full screen, pause it and resume playing when they log back into Facebook. Movie lovers may also post comments on the movie, interact with friends and update their status-the usual Facebook activities.

Within 11 hours of being posted, 1,914 people liked the idea of watching "The Dark Knight" on Facebook. When eWEEK asked Facebook what its goal is with the experiment, which will include more film titles, a spokesperson said:

"Right now, more than 400 games and applications use Facebook Credits to give people a convenient and safe way to buy virtual and digital goods on Facebook. We're open to developers and partners that want to experiment using Credits in new and interesting ways, and we look forward to seeing what they come up with."

True perhaps, but there is another play here. Facebook, like Google and so many other Internet giants, is looking to find a larger outlet for its social advertising products. TV naturally provides another ad targeting path for its 600 million-plus users.

Facebook is joining Google's YouTube unit in aggressively pursuing the Web video market in 2011. Google launched Google TV, which offers streaming video applications from Netflix and Amazon, in 2010 with an eye toward reaching millions of TV fans with ads.

Facebook Encroaching on Netflixs Turf

The search engine casually rolled Google TV into YouTube, which has embarked on a number of fronts to expand beyond its amateur, short video chops. YouTube, which is hiring 30 percent more people this year, launched YouTube Next to pair professional video content with display ads.

In a much more understated move March 11, YouTube began airing "Girl Walks into a Bar," its "first feature-length film created specifically for the Internet," which people can watch free direct from YouTube. Users may of course comment on the movie and share links to it with friends.

No doubt YouTube believes this is a good match for Google TV, leaving little question that it is gearing up for streaming video service in the future.

With their moves last week, Facebook and YouTube signaled aggressive plays for the digital, Web-connected living room, where millions of people gather each day with family and friends to share TV experiences. This is, of course, social on its face, which is where Facebook's interest lies.

Netflix investors quailed at the Facebook news, which clipped shares by as much as 13.42, or 5.7 percent, to 222.09 in trading March 8.

Jefferies and Co. analyst Youssef Squali noted that he expects to see more studios get behind the effort given the large platform and higher price point, providing "yet another caution sign against Netflix's premium valuation."

While Netflix's all-you-can-eat subscription service is more compelling than all of its competitors in the short term, Squali said Facebook's entry underscores how crowded the playing field is getting.

"We expect this competition to curtail Netflix's subscriber growth and drive higher content costs, impacting revenue growth and margins over time," he wrote in March 8 research note.

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