Movies From Facebook Another Threat To Netflix

Just a few weeks ago, Netflix was a "can't miss" stock on Wall Street, topping out at $247 a share. The movie rental company that delivered a death blow to brick-and-mortar video stores appeared poised to inherit the earth.

But what a difference a couple of weeks can make. On February 22, Amazon.com announced a new benefit to its $79-per-year Amazon Prime membership -- unlimited, commercial-free, instant streaming of 5,000 movies and TV shows.

Amazon prime members, who also get free two-day shipping and reduced one-day shipping rates, will be able to stream the movies and shows directly to PCs, Macs or any of nearly 200 models of Internet-connected TVs, Blu-ray players and set-top boxes, according to the announcement from Amazon founder & CEO Jeff Bezos.

That's a direct assault on Netflix, which delivers movies and video content to its members via the Internet. It looked like Netflix and Amazon would duke it out for supremacy.

Three-way battle?

Then today, Facebook announced it is teaming with Warner Brothers to test movie and video streaming. During the initial test, Facebook users will be able to watch a movie for 30 Facebook credits or $3.

"Facebook has become a daily destination for hundreds of millions of people," said Thomas Gewecke, president of Warner Bros Digital Distribution in a statement. "Making our films available through Facebook is a natural extension of our digital distribution efforts. It gives consumers a simple, convenient way to access and enjoy our films through the world's largestsocial network."

And, from all appearances, it provides still more competition for Facebook, who no longer has the digital download universe to itself. Will the competition take a toll on the high flying Netflix?

A negative

Goldman Sachs analyst Ingrid Chung says nothing will happen quickly. She says her firm isn't backing off its current profit estimates for Netflix. However, she concedes no one in the investment community saw this coming, and over time Facebook's entry into the video business could be a negative for Netflix.

That's all Wall Street needed to hear. Netflix stock dropped nearly six percent in Tuesday's trading, off 21 percent from its recent 52 week high.

The video rental world can turn on a dime. Just ask Blockbuster.