Netflix (NFLX) stock jumped 5.6% Wednesday after the streaming video service introduced a feature that lets subscribers share their video watching habits with friends and family through Facebook (FB).
Analysts say integrating with Facebook could make Netflix a stickier service and cut subscriber turnover. Netflix members will be less likely to quit the service if the feature increases user engagement and gives them more suggestions of good videos to watch, says Wedbush Securities analyst Michael Pachter.
"Those kinds of discoveries are what keeps you from quitting Netflix," Pachter said. "Finding out what your friends are watching will open up more possibilities to each user that they might find interesting.
It also could be a step toward Netflix offering individual accounts for family members, which would increase revenue and subscriber numbers. After all, many husbands won't want their wife's "chick flicks" displayed on their video watching history for others to see.
Netflix shares rose 5.6% on the news. Facebook shares fell 2.7%, perhaps on worries the Netflix integration could lead to more "oversharing" of personal information on Facebook, a trend that is turning off some young Facebook users.
While Pachter says Facebook integration will be a good addition for Netflix, he says investors got carried away Wednesday.
Dougherty analyst Steven Frankel agreed. "Social integration is great, but I don't think it has any meaningful financial impact on the business," Frankel said. "To me, it's a non-story," especially since Netflix has been talking about doing this for more than a year.
Netflix shares also got a boost from a Goldman Sachs report Wednesday that showed Netflix making gains in the online video market, especially among consumers ages 18 to 29.
Current Netflix members in the U.S. will be given the choice to opt-in to the Facebook sharing service this week. The integration will add new rows to their Netflix page labeled "Friends' Favorites" and "Watched by your friends." And subscribers will have the option to share their viewing habits on their Facebook page. Plus, subscribers will have the ability to control which video watching they share with others.
Movie Sharing Not Required
But Netflix users could simply decide to pass on the feature, rather than share possibly embarrassing video watching behavior, such as binge viewing of reality TV shows like "Bridezillas" and "Jersey Shore.
Netflix said the Facebook feature is meant as a way for people to find movies and TV shows to watch based on what their friends are viewing.
"There are few better ways to find a movie or TV series you'll love than hearing about it from your friends," Tom Willerer, vice president of product innovation at Netflix, said in a statement. "Facebook already makes it easy for our international members to connect with friends over TV shows and movies, and we're thrilled to now bring this experience to our U.S. members.
Netflix has offered social features to its international members for more than a year. The introduction of Facebook integration in the U.S. became possible after Congress updated a video-sharing privacy law earlier this year, Los Gatos, Calif.-based Netflix said.
Netflix plans to add other new capabilities. "Through the Netflix-Facebook integration we want to let Netflix members express themselves on Facebook and provide a digital version of the proverbial water cooler," Willerer said.
Netflix used to let its members share what titles they had watched with other members, but it shut down its Friends and Community section in 2010.