'LIKE' IT? Warner picked "The Dark Knight" as a launch…
Reporting from L.A. and San Francisco — Forget buying a movie. Now you just have to "like" it.
In a first-time embrace of the tradition-bound film distribution business and the emerging world of social media, Warner Bros. has launched an application allowing users to rent and watch movies directly on Facebook, starting with "The Dark Knight."
Though online movie rentals have been available for more than a decade, they have never before been possible directly on a social network site. Integrating movies into such sites where people find content based on the recommendations and tastes of their friends could be crucial as studios look for new ways generate revenue online and make up for declining DVD sales.
The new offering fits Facebook Chief Executive Mark Zuckerberg's often-stated goal "to make everything social." He wants users to be able to engage in all sorts of activity on Facebook, such as e-mailing and sharing photos, playing games and watching video.
"We think this is a new frontier in making our films available," said Thomas Gewecke, Warner Bros. president of digital distribution. "We're going directly to people who are already self-identifying as fans."
Studios regularly advertise and promote movies on Facebook but have never before streamed them on the site. "The Dark Knight" represents a test not only for that business but also for the social network's potential as a media platform.
Gewecke said Warner decided to kick off movie rentals on Facebook with director Christopher Nolan's second Batman movie because it is one of the studio's most popular, with nearly 3 million registered fans. Beginning on Tuesday, Facebook users in the U.S. will be able to rent the picture for 48 hours and watch it directly on the site for $3.
That's similar to what studios charge to rent movies from other providers such as Apple's iTunes and Amazon.com. However, Warner is using the "Facebook credits" system, through which the social network typically takes a 30% cut on transactions.
Warner will soon offer more movies on Facebook, Gewecke said, along with the option to purchase and download them.
The appeal to Hollywood is simple: More than 600 million people around the world are registered Facebook users and it's the second-most-visited website in the U.S., according to ComScore, an Internet marketing research firm.
At the same time, DVD revenues are falling while online viewing is rising. Last year, U.S consumers spent $385 million to buy or rent movies online, according to IHS Screen Digest.
That was a 38% increase from 2009 but still just a fraction of the $16.3 billion spent on DVDs and Blu-ray discs, down 6% from 2009, according to the Digital Entertainment Group.
On Facebook, Warner is seeking to take advantage of the site's social tools, so that when one person watches a movie on the site, it will automatically be promoted to all of his or her friends.
Other studios are watching how it works and probably will follow suit quickly if it proves popular.
"Finding ways to monetize the fan bases that exist in Facebook is something we look at all the time," said Curt Marvis, president of digital distribution for Lionsgate. "I think it makes sense to explore all avenues that can help increase the digital business."
As Facebook takes its first significant step in connecting users with movies and television shows, it could soon compete with other online video providers such as Apple, Hulu, YouTube and Netflix. It is already one of the Web's most popular sites for uploading and streaming video, with 42 million viewers in January, ComScore data showed.
In response to the news of Warner's new offering, Netflix stock dropped 6% on Tuesday as some analysts said it faced a new threat.
"Facebook represents a new potential entrant that few in the investment community were concerned with prior to this announcement," Goldman Sachs analyst Ingrid Chung wrote in a research note.
However, Lazard Capital analyst Barton Crockett called it "a stretch to see this as a precursor to more from Facebook." He noted that whereas Facebook's offering is pay-per-view, Netflix has drawn more than 20 million subscribers in large part because it offers tens of thousands of movies and television shows for a flat monthly fee.