Warner Bros. announced this morning that it would stream movies through Facebook. The Facebook Movies system currently offers just a few films, but the company has plans for expansion. After this news, Netflix stock fell, and buzz about Facebook Credits increased.
Facebook movies digital rentals
On the Warner Bros. Facebook page, there is a new feature. Users can now digitally rent movies and stream them directly in Facebook. This option is currently available for just a few movies, including “The Dark Knight.” Renting the movie for 48 hours costs 30 Facebook Credits, or the equivalent of about $3. This option is only available on a test basis to about 30 percent of United States Facebook users.
Netflix stock drops on Facebook Movies news
The news of Facebook Movies has already had an effect on the online rental business. Netflix shares dropped more than 3 percent in the first hour of trading after the announcement. Netflix currently accounts for about 20 percent of all online traffic. In December of 2010, a report found that Facebook accounted for almost 10 percent of online traffic to video-sharing sites. Combining the traffic of Facebook with in-line video sharing means that Netflix could be facing its first real competition — depending on the content that is eventually made available.
The question of Facebook Credits
Facebook movies is the first major non-game application to make use of Facebook’s soon-to-be-required payment system. Facebook Credits currently cost $1 for 10 Facebook Credits. There is no assurance, however, that Facebook Credits will remain a monetary system tied exclusively to the value of the dollar. By creating its own monetary system, Facebook is creating the flexibility to increase income simply by adjusting its own conversion rate. If Facebook were to change the rate, for example, to nine Facebook credits per dollar, the company would increase its revenue by 1.1 cents per credit purchased. It may seem small, but multiplied by billions of credits purchased, it adds up to a significant payday for the company.