Warners Buys Flixster: Can Studios Buy Engagement With Individual Consumers?

In a move signaling just how important social media recommendations have become for film marketing - and how important gathering personalized data about users and what films they are searching for may become - Warner Bros. Home Entertainment Group has acquired Flixster, the social media site for movie-lovers, for an undisclosed price that some reports place at just under $100 million.

Owning Flixster gives Warners access to all sorts of user data. Also part of the deal is Rotten Tomatoes, the movie review site that Flixster acquired from News Corp. in 2010. Yes, it's a bit creepy that a big movie studio now owns Rotten Tomatoes, the site where many consumers go to get (impartial?) movie recommendations. But the real importance of Warners acquisition of Flixster may be that Warners is now better prepared to compete with the online movie delivery sites that are building up huge libraries of user data (e.g., Netflix, Apple and Amazon.com) that can be used to target movie (and other kinds of) advertising in the future.

For anyone following the new world of digital distribution, it's clear that the Warners/Flixster deal is part of a much larger pattern of change.

In the last 10 years, online delivery and cheap digital copying have rocked the recorded entertainment business to its core. For example, outflanked by Apple, the old world music companies had to learn the hard way that selling directly to individual consumers - and listening to and responding to their preferences - was the only profitable model for recorded music in the 21st century.

Today, 100 year old movie studios, who (like the old school record companies) built very profitable legacy businesses as wholesalers (in the case of the movie studios, selling only to exhibitors, TV networks and other middlemen) are realizing they too must change.

When digital distribution first became a possibility, the big music companies were slow to act and they lost out to Apple, a company that connected directly with consumers, offering cheap digital downloads and sophisticated mining of user data.

The acquisition of Flixster by Warners suggests that at least one big studio doesn't want the pattern to repeat in the movie business. With Flixster, Warners jumped at the chance to acquire user data and a platform for engagement with individual consumers.

It's too soon to say whether the price Warners reportedly paid for Flixster ($100 million may seem like a lot, but it's less than Warners typically spends on making and marketing just one movie) was a good deal. But this isn't an isolated transaction. Warners has been perhaps the most aggressive studio when it comes to experimenting with online tools. For example, in March of 2011, Warners started testing movie rentals through Facebook. According to a March 28th, 2011 article in the Wall Street Journal, fans can now pay $3 for a 48 hour rental window for certain Warners films (e.g., “Harry Potter and the Sorcerer’s Stone,” “Harry Potter and the Chamber of Secrets,” “Inception,” “Life as We Know It” and “Yogi Bear”) with charges paid in Facebook credits — the social-networking site’s payment service — with Warners getting just over $2 per rental - Facebook keeps just 30% of the fee.

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