The most talked-about story in OTT this week was a deceivingly simple announcement by Warner Bros. Entertainment—a division of Time Warner Inc.—that it will offer movie rentals through Facebook for 30 credits each ($3, of which Facebook keeps 30%, about a buck a rental). At this point, this service/test offers but one title: The Dark Knight. LostRemote has a nice write-up of the process through which Facebook takes you once you decide to “watch” the movie. No doubt to make a point, this particular title is not available via Netflix streaming.
For the record, there is nothing unusual about this model (online pay-per-view rental) or its pricing (competitive with other services). It’s a pretty straightforward OTT pay-per-view rental with no bells and whistles.
Why, then, are many coming out in support of this model’s validity at such a nascent stage? Some, in fact, view it as a potential “powerful disruption path” in the growing OTT delivery market; others wondered if we might one day look back at this and say it “shook up the media world.” Yes, modifiers like “potential” or “might” are often invoked, perhaps an attempt to soften the doom implied by phrases like “powerful disruption.”
Even in its softened form, however, believers act as if it’s a foregone conclusion that this model will not only work but quickly evolve to compete with Netflix, the nation’s leading OTT video service with 20+ million subscribers.
Why are they so confident in this thesis? How can they rationalize such imposing expectations? In my mind, their argument goes something like this:
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Among the various themes that dominate conversation in these social spaces are—surprise—movies and TV shows (it’s a virtual water cooler, remember?). The movie in question, The Dark Knight, already enjoys a Facebook “friend” list of four million; a sizable segment of like-minded consumers sympathetic to products and services related to this specific media property.
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Facebook is already proving a major destination for online video. According to comScore, in January 2011 Facebook ranked sixth among the most popular web video sites in the U.S. with 42 million viewers, each who spent on average 15.4 minutes watching Facebook-based video.
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The format through which these consumers engage video is a dynamic social space in which, though the owner of the content sets the general framework (the “virtual screening room”), the specific experiential dimensions are dictated by the user. This enables radical personalization within a closely-intertwined social space that encourages sharing and community, not to mention finely-tuned market targeting. This is optimal for studios looking to expand direct-to-consumer relationships.
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Conclusion: large social networks like Facebook offer fertile ground for media owners to build branded distribution conduits in which (a) the metastructure of the experience is defined by content owners, (b) the microstructure of the experience is defined by users, and (c) the user is inclined to share their experience with others of similar interest.
Is this argument valid? Well, Wall Street thinks so. On Tuesday, the day Warner Bros. announced the Facebook deal, Netflix shares were down 5.8% and Coinstar (owner of Redbox) shares were down 5.3%. When combined with Amazon’s entry into the streaming space, little wonder Netflix stock continues to be beaten down, declining from its high of more than $240 per share in February 2011 to $204 today.
Put more simply, Netflix has lost more than 16% of its value in just a few weeks. Why? It seems Wall Street believes that Netflix’s days as the unchallenged leader of OTT video are over, and that legitimate and worthy competitors are now stepping into this space in a big way. And in this they are correct: the space is becoming increasingly competitive with brands capable of moving markets all on their own.
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