Facebook makes play for original content

Facebook has announced an interesting move for the original content market in creating Watch, a revenue-sharing video distribution model which gives the content creator the lion’s share of cash.

Watch is essentially a new platform for shows on Facebook. It’s a tab which features various bits of content from series to one-off shows, and also make recommendations to the users based on preferences. How successful this personalization feature proves to be is unknown for the moment, but Facebook certainly has a lot of user information to build a successful recommendation engine.

With trends in the video world only going one direction, the land-grab for content is becoming fast and furious. Whether it is on the premium sides of things with block-buster movies or sports rights, through to the more niche original content programming, the battles between distributors are becoming furious. For the most part, this has escalated the price of content, but Facebook has taken an alternative route.

In a more traditional relationship, distribution platforms like Netflix or Sky would pay a single-cash sum for content (though there will be other conditions), but Facebook is relying on the power of its advertising model to interest content producers. According to TechCrunch, advertising revenues which are associated with the video will be split with Facebook taking 45% and the content creator collecting 55%. If this turns out to be true, it could be a very tempting offer for the gamblers in the world.

The more cautious content creators will of course opt for a guaranteed amount of cash, but those who are a bit more adventurous could opt for Facebook’s idea. Facebook has a community of two billion users around the world, and when it comes to the walled garden advertising model, no-one does it better. During the last earnings call, Facebook reported total revenues hit $9.164 billion, a year-on-year increase of 47%, with mobile advertising accounting for 87% of this figure. That is a big pot of cash to keep an eye on if you are a content creator with that brilliant idea.

Facebook Watch

We’ll never know the answer to this, but imagine the advertising revenues which could have been created if something like ‘Breaking Bad’ or ‘Game of Thrones’ was on an open social media platform instead of hidden behind a subscription model. The producers of the shows might not have made more money, but it is certainly something which will be a talking point from now onwards. Should this be seen as a major threat for the traditional broadcasters, or even the telcos who are vying to get into the content space?

“Not for now,” said Paolo Pescatore of CCS Insight. “Telcos have yet to make big moves in original content and most are focussed on premium rights whether that be sports or movies.

“Also, Facebook along with other web providers represent a great channel for telcos to boost audiences (BT Sport with UEFA Champions League final). Expect to see more moves from rights holders to publishing short form clips on social and web providers. And this is great news for the likes of Facebook, no need to invest in costly sports rights.

“Obviously it’s early days, but the new service and features has been purpose built for Facebook underpinned by strong social aspects. With everyone piling into offering video and TV it is becoming increasingly hard to differentiate. Fundamentally it’s all about the content, creating that next biggest blockbuster and only time will tell.”

Another interesting idea to bear in mind is the advertising side of things. Anyone who wants to get into the content game obviously has to tell the market about it, which can lead to very expensive advertising campaigns. In building this revenue sharing model, Facebook has placed some of the pressure on the content creators as well. Facebook will obviously promote the content, but with 45% of the pie to eat, the creators will want to push it as well. The job is no longer mission complete when the contract is signed; performance related pay-outs mean the creators have a stronger interest in performance.

Facebook’s growth in recent years can be primarily put down to the extraordinary acquisition of users, but that is starting to slow. To continue the fantastic increases in profit it has experienced, the team will need to figure out how it can increase the revenue associated with each individual user. Video has certainly been touted as one of the solutions to this roadblock.

“This move is far more than just the creation of a new tab on Facebook,” said Dror Ginzberg, Co-Founder & CEO of Wochit. “This is effectively the launch of Facebook TV and I think we can count on this being the first step toward the social media giant broadcasting its own original content.

“A key approach will also be to broadcast live sports events too. Previously, sports, like the Mexican football league, had been broadcast on Facebook Live, but the new Watch tab is the natural home for this now. We may also see Facebook finally become a player in the race to broadcast the Premier League when the rights are up for auction next year.”

Whether entering into the sports content market with any might is an ambition here remains to be seen, though the model itself is an interesting one. Facebook has proven to be a disruptor in the past, and this approach to content could certainly ruffle a few feathers.

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