March 15, 2013, 3:03 PM

Netflix nudges closer to Facebook

Netflix lets subscribers show Facebook friends favorite shows and movies.

Lead Photo

Facebook's Mark Zuckerberg and Netflix's Reed Hastings

Netflix Inc. and Facebook Inc. became closer pals in the United States this week. The streaming video and DVD rental company introduced a service that enables online consumers who belong to the social network to keep tabs on what their friends are watching and liking.

Here’s how the service, called Netflix Social, works: A consumer connects her Netflix accounts to her Facebook accounts, via the Netflix home page. When she watches or rates a movie, TV show or other title, and is logged into Facebook, that information is shared with her Facebook friends. Netflix says the service defaults to enabling that sharing only on Netflix.com, but that consumers can manually go into their Netflix accounts to share that information on the social network.

A consumer who signs up for Netflix Social results sees two rows of shared content when she goes to Netflix.com, says Netflix director of product innovation Cameron Johnson. “You'll see what titles your friends have watched in a new ‘Watched by your friends’ row and what they have rated four or five stars in a new ‘Friends’ Favorites’ row,” he says. “Your friends will also be able to see what you watch and rate highly.”

Consumers can choose to not share watched titles—say, to hide “guilty pleasures,” Johnson says—and can “unshare” titles.

Netflix says the service will roll out to U.S. consumers this week. For more than a year, consumers outside the United States have been able to use Netflix Social. It wasn’t available in the U.S. because the Video Privacy Protection Act—enacted in 1988 in response to the publication of the video rental records of U.S. Supreme Court justice nominee Robert Bork, who failed to win the job—generally prohibited sharing such information. The law was amended in January to enable online consumers to consent to sharing that information.

The new service comes after Netflix earlier this year reported a 13% revenue increase for 2012, to $3.61 billion. Net income decreased nearly 78% year over year, to $7.9 million, while the number of paid subscribers increased 41%, to 30.36 million globally at year’s end. Netflix now says it has 33 million subscribers.

Netflix has been rebounding since it shelved plans in the fall of 2011 to split the company into two divisions, one for DVD rentals and the other for streaming content online. That plan would have raised subscription fees, and prompted many consumers to drop their Netflix plans. The company also faces other threats from cable companies’ pay-per-view content,  from Amazon.com Inc.—members of its Prime shipping program receive access to more than 25,000 streamed titles—and now also Redbox, which this week went live with its Redbox Instant streaming service.

More is to come with Netflix Social. “The Netflix social features will evolve with new capabilities being tested regularly,” Netflix says in a statement. “Upcoming tests include capabilities to allow members to explicitly share their favorite titles on Facebook and discuss with their friends.” Whether Netflix Social will include new ways to buy or rent content is unclear, and Netflix provided no immediate comment.

Analysts are generally positive about the new service.

“This is a great way to aid discovery,” says Sucharita Mulpuru, Forrester Research Inc.’s vice president and principal analyst for e-business. “I'm bullish on it. It's voyeuristic to see everything my friends are downloading now.”

Greg Sterling, founder of research and consulting firm Sterling Market Intelligence, says both Netflix and Facebook will benefit from Netflix Social. “Facebook is helping people build out richer profiles with content that they like,” he says. “From Netflix's point of view there's additional brand exposure that could lead to more subscriptions and/or improved customer retention.”

Lou Kerner, managing partner of The Social Internet Fund, which invests in social and mobile companies, says the service will make the Netflix experience “much richer and engaging” for consumers. But, he adds, “unfortunately for Facebook, the default experience on Netflix does not share your (information) to Facebook, unlike other apps like (online music service) Spotify. While Netflix users can change the defaults, few are likely to.”

Netflix is No. 9 in the Internet Retailer Top 500 Guide.

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