Is Facebook the next Netflix or Hulu?

Over the past year Facebook has been slowly entering the world of online video.  First, the site began offering live video streaming through two partners – Livestream and Ustream in August 2010.  This partnership enables companies or individuals to stream live content directly to viewers while still in Facebook.  Several popular events have been streamed this way including Facebook announcements and concerts.  MLB is streaming some its 2011 pre-season games through Facebook as a way to promote their online subscription.  Live streaming within Facebook keeps people within the website and getting the content that they want.

Facebook has also started allowing content owners to offer movies for rent in March 2011.  Warner Bros. was the first studio to start offering content through Facebook. Users can rent The Dark Knight directly from the movie’s fan page for 48 hours.  The cost is 30 Facebook Credits (or $3).  The selection was expanded to another 5 movies ranging in price from 30-40 Facebook Credits ($3-$4).  Before a user can rent, though, the user has to agree to allow a “watch app” to install itself into her Facebook account.  This grants Warner Bros. access to the user’s name, profile picture, gender, list of friends, any public information shared, and other information.  This is a great deal for the studio as they get direct information about the people watching their content.  It isn’t clear, though, if consumers will agree to this, as that is more information than they would normally have to give to a studio – or even a retailer – if they were going to the theater or renting on another site, such as Amazon or Movielink – or through their cable company (though admittedly the cable company, or even another website knows a lot about their consumers’ viewing habits).

Facebook hasn’t yet released any plans about becoming a video aggregator, but they seem to be putting their toe in the water to see if consumers will consume video on their site – and pay for it.  According to Nielsen NetRatings, the site had 130.8 million unique visitors in the United States in February 2011 who spent an average of 6 hours and 36 minutes on the site over the month.   One strategy to increase these numbers even more – especially the amount of time on the site – is to add video so that the visitors will stay to watch content.

Facebook has the capital to invest in a video strategy – if that want.  People are already discussing movies and television shows on the site and sharing recommendations.  Distributing large amounts to the video to the site, though, may not make sense.  Facebook would have to develop a method for user’s to discover content in a way like they do on Netflix or Hulu and they’d have to host the content.  Of course, they’d have to manage all of that as well and develop a content acquisition team to handle – and then develop all of those content relationships.  Yes, they already have many of the relationships and clearly the company has scaled up as they grew but content distribution is not the same as social media.

My expectation is that Facebook won’t compete with the existing content aggregators but rather will complement them.  There is a rumor that Netflix and Facebook are working together to develop a closer relationship.  It would likely allow people to share their comments about content on Facebook and then watch on Netflix Watch Instantly, if available and they are a subscriber, or direct the user to sign-up for Netflix.  Netflix and Facebook had a previous relationship where Netflix users could rate content and comment on it on Netflix then post that comment to Facebook.  That feature was removed last year, but will likely come back bigger and better – and help both companies.  It makes sense for Facebook to develop features like this for many video sites and focus on their social networking expertise.

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