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Movie Studios Have New Ally in Distribution Plans: Facebook

Studios Go Direct-to-Consumer With Milyoni, Adding Pressure on Netflix, Amazon

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U.S. internet users already spend more of their online time on Facebook than anywhere else, but would that amount shoot up if they could also watch movies on the social network?

The Dude abides, on Facebook.
The Dude abides, on Facebook.

We're about to find out.

At the F8 conference in September, Facebook announced it was partnering with Hulu, Dailymotion, MyVideo.de and Izlesene to stream video content through apps hosted on its platform. Netflix also announced it had developed a Facebook app, but it isn't currently available in the U.S. due to a privacy law that prohibits disclosure of users' movie-rental history.

But the movie studios themselves are increasingly selling films direct to consumers on Facebook. Warner Bros., Lionsgate and Universal have collectively distributed about 45 feature films through a "Social Cinema" app developed by the Facebook commerce-oriented company Milyoni. Miramax unveiled its exPerience app in August, offering 22 movies including "Good Will Hunting" and "Gangs of New York," and Paramount created a Facebook app for renting the "Jackass" movies. The apps are located within the movies' fan pages.

Miramax rentals are available for 30 Facebook credits -- the equivalent of $3, since each credit costs 10 cents -- while Milyoni charges between 30 and 50, or between $3 and $5. Both apps make movies available for a 48-hour window. According to the terms of Credits, Facebook gets a 30% cut of revenues generated in the transactions.

While Miramax and Warner Bros. (the studio that has worked the most with Milyoni, distributing about 30 movies to date on Facebook starting with "The Dark Knight " in March) haven't disclosed their audience numbers on the social network, their willingness to offer rentals there may reflect their desire to foster competition among online distribution platforms.

At a conference this fall, Miramax CEO Mike Lang said that digital monopolies were a greater threat to the film industry than piracy and that his studio had been aware of the importance of a competitive marketplace when doing deals with Netflix and Hulu.

Milyoni's VP-Marketing Dean Alms said that the studios his company works with saw the opportunity inherent in their movies' large fan bases ("The Dark Knight " page had roughly four million fans when the movie rental was first made available there) and wanted to offer them digital content in the same place. He also noted that an effort was made for some releases to expand the potential audience by buying "sponsored stories" ad units that would be viewable to friends of movie fans.

Milyoni gets paid by taking a small cut from every rental, and "the larger the library [the studios] bring to us, the better the deal," said Mr. Alms.

Mr. Alms said that the Milyoni app's social features, which allow for commenting and sharing with friends while watching a movie, differentiate it from video-on-demand services offered by Amazon or iTunes. (For example, while watching "The Big Lebowski," quotes from the cult classic, such as "The Dude abides," will appear underneath the viewing panel, and a user could opt to "like" it on Facebook.) It also allows for valuable reporting to the studios on the demographic profile of people renting films.

"It provides intelligence about spending marketing dollars wisely," said Mr. Alms, who believes that studios can use Milyoni's data to more effectively target audiences for future releases.

Milyoni has focused almost entirely on U.S. distribution so far due to licensing restrictions, but did recently offer programming from British TV's Adult Swim channel to Facebook users in the U.K. through Turner Broadcasting. Mr. Alms said the venture-backed company is in talks with other movie studios, as well as some U.S. TV networks, to expand the distribution.

A Facebook spokeswoman said she couldn't confirm the number of movie titles available on the social network, since it has an open platform and there's no approval process in place to catalog who's using it.

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