Speaking of movies, this week brought news that Facebook was dipping its toe into Hollywood's waters, by offering Warner Bros. "The Dark Knight" for purchase and rental to its members. Though Warner positioned the move as an experiment, Netflix stock went into a free-fall as investors swooned over Facebook's possibilities. But as a former business school professor of mine was fond of asking his class, "Is this a BIG deal or a LITTLE deal?"
For now, I think it's a little deal. First off, the Facebook offer suffers from a burdensome 48-hour expiration policy from purchase. Similar expiration policies have hobbled online rentals for years, as users don't want to be bound by Hollywood's time-clock. Then there's the issue of price. True, by using Facebook credits, and masking the real price (a reduced $3 in this case), users will focus less on the a la carte model, but as Netflix - and pay-TV operators - have amply demonstrated, 1-off rental or purchase is a dead end. All that said, if Warner, and others, really commit, and Facebook deploys a subscription approach, this little deal could morph into a big deal fast. But for now it's not going to change the market's dynamics significantly.
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