Netflix Unfriended by Facebook TV

NEW YORK ( TheStreet) -- Facebook took some air out of the Netflix ( NFLX) balloon when it announced its own movie streaming service Tuesday.

Working with Warner Brothers Digital Distribution, Facebook is testing a video service that will let users rent movies for $3, or 30 Facebook credits. The first installment of the trial is the 2008 Batman movie The Dark Knight, and users can have access to the rental for 48 hours.

The move was not welcomed by Netflix investors who see Facebook's 600 million-member social media site as a formidable challenge to company's $8-a-month video streaming efforts. Netflix shares fell more than 4% to $199.30 in early trading Tuesday.

Netflix has been building momentum as the Internet TV and movie streaming leader, inking recent deals like a non-exclusive pact with CBS last month. But the race for Net videos has been heating up lately as giants like Amazon ( AMZN) join the action with their own streaming video offer.

Given Facebook's immense reach and the apparent ease at which it can keep users on the site while they watch movies, the move certainly threatens the Netflix model. Not only does Facebook give the studios access to its vast membership, it can also deliver advertisers a big group of consumers with shared interests.

This customer control aspect is particularly important for outfits like Google ( GOOG), which has struggled to get a successful advertising angle onto its popular YouTube site. Google has also been working on a movie streaming service called YouTube Shows and YouTube Movies, but the video offerings have been limited.


--Written by Scott Moritz in New York.

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