March 9, 2011, 12:00 PM

Will consumers watch movies on Facebook?

Warner Bros. and the social network are testing whether consumers will stream movies on Facebook. And they are starting with the popular Batman film "The Dark Knight."

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 Movie studio Warner Bros. announced yesterday that it testing whether consumers will stream movies on Facebook.

Consumers who click that they Like “The Dark Knight” can rent the 2008 Batman movie through the Warner Bros. Facebook page for 30 Facebook Credits, Facebook’s virtual currency, or $3.

Once a consumer clicks the “Watch Now” button, the purchase is deducted from her Facebook Credits account and the film begins streaming. Viewers can pause, restart and rewatch the film for 48 hours. The movie house is starting with one film but plans to add more.



The service is currently only available to U.S. consumers.

The move is aimed at leveraging Facebook’s 500 million active users, says Thomas Gewecke, president of Warner Bros. digital distribution.

“Facebook has become a daily destination for hundreds of millions of people,” he says. “Making our films available through Facebook is a natural extension of our digital distribution efforts. It gives consumers a simple, convenient way to access and enjoy our films.”

Because Facebook generally takes a 30% cut of the revenue from sales by retailers and other companies that accept Facebook Credits for payment, video streaming could open up a lucrative new revenue source for the social network. The announcement may also signal to digital content providers like iTunes, Amazon and Netflix that Facebook is interested in the space, say analysts.

In the short term Warner Bros.’ s Facebook application does not represent a threat to Netflix, wrote Ingrid Chung, a Goldman Sachs analyst in a note to investors. That’s because the offering is only available in a pay-per-view format, unlike Netflix’s subscription model. And even should Warner Bros. offer more films, it's not likely to match the content of Netflix, which offers movies and TV shows from many studios.

Looking ahead, however, Facebook could threaten Netflix because of its sheer size, Chung says. Facebook has more than 500 million active users, 50% of which log on to Facebook in any given day, according to the social network, which compares to Netflix’s roughly 20 million subscribers.

“We believe that the ‘wisdom of friends’ could be a bigger driver of movie viewership than the ‘wisdom of crowds,’” wrote Chung.

However, Netflix is not sitting on the sidelines. The retailer is also working on an integration with Facebook, wrote Reed Hastings, the company’s CEO, in a January letter to investors.

“We’re working on an extensive Facebook integration, which will further the notion of a personal Netflix account,” he wrote. “This evolution from household to personal relationship will take several years, and there will always be some households that only have one account.” He did not provide further details.

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