Why Warner's Movie Test on Facebook Is Such Serious Business

It Won't Destroy Netflix or iTunes, but It Will Change the Media Landscape

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You could argue Warner Bros.' test to rent, and soon sell, "The Dark Knight" and other films on Facebook is just another promotional deal on the world's largest social network. But it isn't, and that's why it sent shivers through the media industry: not for what the deal is today but for what it could easily mean.

First, what it doesn't mean. Netflix, Hulu and iTunes have nothing to worry about, yet. They've had years to build up TV and film libraries; one, Hulu, is even jointly owned by its content providers.

'The Dark Knight'
'The Dark Knight'

But the idea that the studios would start selling and distributing their wares on the world's biggest social network -- indeed, a socially-driven parallel internet -- is game-changing. Here's why:

  • It's yet another distribution platform for the film and TV industry, much bigger (soon to hit 650 million users) and more global than any other. The entertainment industry is eager to cultivate a competitive market for content, rather than hand its business to one dominant player, as the music business did with iTunes.
  • Entertainment is an inherently social, sharable experience. Apple understands that, which is why it launched Ping, its iTunes social network. Twitter's trending topics show that TV is social every night in prime time. Entertainment recommendations spread through word-of-mouth, and Facebook is the world's water cooler, back fence and Rolodex in one.

  • Facebook is one of a few third-party apps on every smartphone and internet-connected TV regardless of platform, which means that it could be as ubiquitous as iTunes or Netflix on the devices that matter.
  • The deal is actually great news for YouTube, which would also love to have the studios sell and rent their wares directly to consumers. YouTube has a limited catalog now, but would be more than happy to expand it on the same terms as Facebook and iTunes (30% of sales).

  • For Facebook, it's an important beachhead for commerce beyond virtual goods. Content is the ultimate virtual good, and Steve Jobs sold $1.1 billion worth of it last year. If people start buying content with virtual currency on Facebook, the doors swing wide open. It's easy to imagine transactions becoming a bigger business for Facebook than advertising.

One thing to know about Hollywood: If something works at a rival -- be it a film, TV show or marketing strategy -- it is quickly copied by others. If this works, expect others to follow, and fast. A Sony exec says they're looking into it. Trust me: Everyone is. And why not? Studios don't just gain distribution leverage with iTunes and everyone else, they get a trove of social data on who is watching, where and how that is shared. That's something they can't get anywhere else, especially not on this scale.

Facebook is already the fastest-growing video site on the web. It's No. 6 today (up from No. 8 a year ago), according to ComScore -- ahead of Turner, Fox and Hulu -- and everyone else is pretty much standing still. While that's interesting, the really important stat is that Facebook accounts for one in eight of all minutes spent on the web (in the U.S.). Beware anyone who says a new media platform will "destroy" another. If that were true there would be no radio or network TV today. Facebook has shown no indication that it's building another iTunes or Netflix to formally take on this market. It doesn't have to: giving users yet another reason not to leave is enough.

Michael Learmonth is digital editor at Advertising Age. Follow him on Twitter.
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