The long-term significance of Facebook’s entrance into scripted content.
Earlier this year, as I was reporting a story on the impending disruption of Hollywood, I asked a Facebook executive when the social network behemoth would start creating original video content similar to Amazon and Netflix. “Eventually it will,” the Facebook executive told me. This person then reiterated, for emphasis: “It’s not a matter of if, it’s a matter of when.”
In a way, the calculation was obvious. For much of the past half-a-decade, executives at Facebook have been aware that their growth rate would eventually slow down—after all, there are only a certain number of people on the planet, and Facebook already has a quarter of them on its network. In anticipation, the company knew it would have to transition to a new metric in order to entice investors and advertisers and accommodate for the new reality of this staggering growth. Rather than fixating on the sheer number of eyeballs signing up for the site, in other words, Facebook would presumably start to measure its success by how long those eyeballs stayed glued to the service.
In recent years, Facebook has learned that the best way to get those eyeballs to stare at a screen for long periods of time is to show them videos. Funny videos, sad videos, videos that make you cry because there’s a puppy in a wheelchair, or videos that make you mad—such as one of Donald Trump mocking a disabled reporter, or countless others in this appalling and expanding genre. A few tweaks of the algorithm here, some levels pulled there, and that’s exactly what happened.
But now the company needs to come up with new ways to ensure that those eyeballs stay longer than just a few minutes for an angry Trump video. Which explains why the news broke last week that Facebook has finally starting on its next phase in video—creating original content exclusively for Facebook. Executives at the company have started meeting with major talent agencies, including the big ones like Creative Artists Agency, United Talent Agency, William Morris Endeavor and ICM Partners.
Facebook’s monetization strategy is going to be different than digital competitors like Amazon Studios, Netflix, Hulu and even HBO. You won’t have to pay a monthly fee to access the content, as you do with those networks. HBO Now is $15 a month; Netflix ranges from $8 to $12 per month. Instead, on Facebook, you’ll pay with your privacy, as you do with everything on the platform. It’s unclear exactly how advertising will work with its new video venture, but you’ll likely see a hyper-personalized advertisement in your newsfeed that relates to the show (or maybe even on the show itself). While Facebook is rumored to be committing as much as $3 million per episode of the shows it is financing, from people I’ve spoken to who work with, and for the social network, over the years, if this new strategy works, it could be the beginning of an entirely new revenue stream for the company.
Mark Zuckerberg is clearly a brilliant businessman. He took an idea (that wasn’t completely his) in a beer can-filled dorm room and made it into the biggest social network in the world, which technically has more customers (also known as “users”) than any other business on the planet. But I can virtually guarantee that he will find the process of creating content in Hollywood more laborious than any other business he has tried to disrupt. Even Netflix, Amazon and Hulu haven’t put a dent into the creation process. They use the same showrunners and studios for their TV shows, the same scriptwriters, directors and guilds for films. For the most part, the only thing these digital upstarts have streamlined is the binge-watching process, and, of course, the distribution method. For now, Facebook will likely be taking the same approach, at first just trying to get some good content on the social network before deciding what to do next.
If original content ends up being financially fruitful for Facebook—which it likely will, given the company’s data collection prowess—I could imagine a world where Zuckerberg explores buying a studio, and placing the content exclusively on Facebook. This could definitively show advertisers and investors that the amount of time spent on the social network is rising. And buying a studio for a $430 billion company, of course, would be like Bill Gates losing a $20 bill in his khaki pants. Marvel, for example, sold to Disney in 2009 for $4 billion. Lucas Films sold a few years later for the same amount. Both of those deals have reaped returns far greater than their acquisition price, and will continue to do so. While that’s largely from movie theatre ticket sales, imagine for a moment that you put those films on Facebook for free and then put a few advertisements next to them.
You could see a world where Facebook buys Lionsgate, Relativity Media, or some such studio, and then ensures that everything is created exclusively for Facebook’s news feed, not for a movie theatre or a competitor like Netflix or YouTube. But at some point along the way, one assumes, if video does become a new leg of Facebook’s ad revenue, Zuckerberg will need to figure how to reinvent how films and TV shows are made, because the current system, which acts very much the same way it did decades ago, is slow and archaic, and not conducive to the way Facebook operates. Hollywood is an industry that would benefit greatly from a little “move fast and break things.” Source Vanity Fair