Entertainment giant Warner Brothers has launched a new program through its Facebook fan page that will allow users to rent films via the website itself by purchasing Facebook Credits, the site’s own currency.
The announcement highlights how Facebook is attempting to pump up revenue and diversify its product base ahead of a possible IPO in 2012.
Currently the site earns 30% of all Facebook Credits sold, and will surely earn even more when app and game makers will be forced to use the credit system from July 1.
Warner Brothers announced yesterday fans of its Facebook page will be able to rent the 2008 blockbuster The Dark Knight for 30 Facebook credits – about $US3. The film can be viewed up to 48 hours after the purchase is made.
Thomas Gewecke, president of Warner Brothers digital distribution, said in a statement the sheer size of Facebook’s user base gives it ample opportunity to sell more views.
“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 through the world’s largest social network.”
Facebook has been attempting to not only boost its revenue – which Bloomberg pinned at $US1.2 billion during the first nine months of 2010 – but diversify its product base.
Advertising makes up the vast majority of Facebook’s revenue. Analysts such as eMarketer predict the site is searching for more ways it can earn money by directly charging the site’s users for add-on services.
Some analysts believe the digital distribution of films on Facebook will allow the social network to move into other areas – possibly even the distribution of physical goods by allowing companies to turn their fan pages into shopfronts.
However, the Warner Brothers announcement isn’t a partnership.
“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,” the company said in a statement.
“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.”
But while the Warner Brothers announcement was welcomed by Facebook users, others see the move as an attempt to quash the power of online streaming and rental services such as Netflix.
After the deal was announced, Netflix shares dropped over 5% – about $US12.
Netflix has been the leader in DVD rental and streaming services in the United States for some time. It earns over one billion in revenue, and its service is available on dozens of digital networks including TiVo, Xbox Live, Blu-Ray and the iOS platform.
And according to a report from CNET, Hollywood producers aren’t so happy with the way things are going. The report claims that while they want to continue with digital distribution, they won’t do so while allowing Netflix to erode revenue.
They say revenue is being taken away from services such as airline screenings, and the fact that cable television stations won’t necessarily screen new films if they are already available on Netflix.
Currently the Warner Brothers Facebook streaming service is only available in the United States.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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