Steve Dempsey: Tune in to see Facebook fight TV
This week Facebook's assault on TV gathered pace. The social network added a small watch tab to the account of all US users. Sure, it's only a few pixels, but it's a gateway to a whole new stream of content and a new revenue stream, or so Facebook hopes.
The tab was announced earlier this year. In August, Facebook boss Mark Zuckerberg called it "a place where you can discover shows your friends are watching and follow your favourite shows and creators so you don't miss any episodes. You'll be able to chat and connect with people during an episode, and join groups with people who like the same shows afterwards to build community."
It sounds a lot like normal TV, with a few Facebook-flavoured ingredients added. It will host programmes made by professionals alongside regular Facebook users. Some of the professional content sounds impressive: live safaris with National Geographic; five-minute science shows from Nasa; a kids' cooking show; and a master woodworker's top tips. The business model is compelling too - the producers of each show will pocket 55pc of ad break revenue while Facebook keeps the remaining 45pc. But it gets even better for producers - or the selected few, at least. Facebook is reportedly paying anywhere between $10,000 and $35,000 for each show. So that's the production costs covered and some incremental advertising revenue for the likes of Tastemade, ATTN, and Vox media. The social media giant is also reported to be investing up to $250,000 for longer, scripted shows that it will own, just like Netflix owns House of Cards.
But success isn't guaranteed. Siphoning off TV advertising into its own version of TV will undoubtedly take time. It will also take money. And it seems Facebook is willing to spend big.
Live sports is one area where investment could pay off. Facebook already streams some baseball games, Major League Soccer, the Mexican soccer league, and a host of college sports. And it's been active in trying to get more sports on-board. But competition is tough. Earlier this year, Facebook lost out to Amazon for the rights to stream 10 American football games. Facebook, Twitter and Snapchat are also jostling for the rights to video highlights from Fox for next year's World Cup in Russia.
And this week Facebook made a bid of around $608m for the digital rights to India's most popular cricket league for 2018 to 2022. Over a billion people worldwide watch the Indian Premier League, so it seemed like a safe bet. But it wasn't enough. Facebook's bid was blown out of the water by 21st Century Fox's Star India, which paid $2.55bn for combined digital and broadcasting rights.
So traditional TV isn't giving up the ghost. Indeed, Star TV is taking the fight to the digital sphere. Through its online platform, Hotstar, it could offer live streaming for premium subscribers, or a delayed feed for freemium ad supported viewers.
So Facebook faces challenges in becoming a flat track bully in the sports arena. But at the same time as it's battling old and new media for sports rights, the social network is spending big to shoring up the less professional end of its video business. Apparently Facebook is offering hundreds of millions of dollars to record labels and music publishers to allow normal users to include songs in the videos they upload. This would provide greater legal clarity for Facebook's advertisers. It would also mean users who add copyrighted music in their videos wouldn't see their videos disappear - and the majority of Facebook's videos come from individual users, not production companies.
But while a windfall may be welcome, the music industry should be cautious. Licensing is vital, but getting hooked on licensing music at the scale that Facebook offers could be a damaging addiction.
This is especially true given Facebook's track record of changing the terms of its engagement with advertisers over time. Remember, the platform's promise to brands and marketers was all about dialogue with consumers. Then organic reach was throttled, until it became a paid platform.
And this is why brands that currently rely on TV to reach their audience should approach Facebook with caution. In the past, the social network has used its incredible reach and targeting ability to brilliantly destabilise traditional advertising models. Along the way, it generates demand by offering preferential terms and sweeteners to various stakeholders. These are typically rolled back when some critical mass has been reached. How will TV fare against Facebook's assault? We'll have to tune in to find out.
Sunday Indo Business