Is Facebook about to become cable TV provider? Don’t bet on it.
The social giant has held informal discussions with cable networks including HBO and Showtime Networks about potentially offering subscriptions to their streaming services on Facebook, multiple sources tell Variety, confirming a Recode report last week that first reported the talks.
However, Facebook currently has no plans to launch a subscription-video product and ultimately is unlikely to pull the trigger on a foray into the pay-TV world, sources said. After initially reaching out to TV networks about the idea, Facebook execs have been leaning toward the conclusion that getting into the premium, over-the-top video biz would be too divergent from its core ad-supported model.
One source emphasized that the talks between Facebook and the TV networks never progressed beyond the spit-balling stage: The parties did not get into negotiations about business terms, such as what percentage of subscription fees Facebook might keep under the proposed distribution pacts.
Representatives for Facebook, HBO and Showtime declined to comment.
The notion was that the likes of HBO and Showtime could be a strong draw to bring users to Facebook Watch, its destination for longer-form, episodic video programming that debuted in August 2017 and has now expanded globally. And Amazon has shown it can amass a big business by aggregating channels: Its Prime Video Channels is pegged at raking in $1.7 billion in revenue this year, projected to more than double to $3.6 billion in 2020 worldwide, according to estimates by BMO Capital Markets.
But Facebook may have had trouble seeing a realistic path to getting a payback on investing in developing and marketing a subscription-based premium OTT TV section of Watch — particularly given the numerous ways consumers can already get channels like HBO and Showtime. Unlike Amazon, Facebook doesn’t have an existing ecommerce relationship with its users or history of distributing paid content, so it would be starting from scratch.
More to the point, Facebook’s entire strategy for Watch has been to build a platform that provides a bigger bucket of ad inventory, to give marketers a place to buy TV-like ads against premium content as it looks for new areas of growth. It doesn’t want to confuse users about what Watch is by promoting HBO subscription signups, just as Facebook Watch has picked up steam since the worldwide rollout. Last week the company claimed 75 million daily users now watch an average of over 20 minutes of video per day (though those numbers aren’t independently verified and super-users may skew average watch-time up).
While the company is continuing to invest in original content going into Year 2 of Facebook Watch — it recently renewed four shows, including drama “Sorry For Your Loss” and anthology series “Sacred Lies” — it doesn’t see paying for content as a long-term strategy.
Facebook’s preference is to be more laissez-faire. It wants producers and creators to feed Facebook Watch, in return for a split of ad revenue, like YouTube. That model was highlighted in a New York Times feature this Sunday, which cited The Jalals, a trio of Australian prankster brothers, as claiming they have earned more than $500,000 from Facebook Watch since its global expansion in August.
Facebook execs have regularly said they don’t envision erecting a paywall for Watch content. But it has rolled out a Patreon-like membership system for users to fund their favorite creators in return for exclusive content and other perks. (Note that YouTube has shifted gears on its original-programming strategy, unifying the slate to better monetize the content through free, ad-supported viewing in later windows.)
Today, Facebook doesn’t really see long-form video as a great business — compared with the cash-spewing machine of News Feed advertising. “[V]ideo monetizes significantly less well per minute than people interacting in feeds,” CEO Mark Zuckerberg told investors Oct. 30 on the company’s Q3 earnings call. “So this means that even though we’ve made video more community-oriented and minimized displacement of social interactions, as video grows, it will still displace some other services where we’d probably make more money.”
But the push to video is necessary, Zuckerberg said, because “It’s what our community wants as long as we can make it social.”
The question is, can conventional TV programming like HBO’s “Game of Thrones” or Showtime’s “Shameless” be made “social” in a Facebook context? The jury is still out.
The pay-TV streaming idea is one of several concepts Facebook has mulled to kick-start Watch. The company recently gave the go-ahead on one such experiment: It licensed 20th Century Fox Television reruns of cult-favorite TV shows “Buffy the Vampire Slayer,” “Angel” and “Firefly” in the U.S. for Watch, on the theory that social-viewing features would enable a new shared experience for fans. The batch of 268 episodes, which launched Nov. 30, garnered less than 1 million views total in the first week. Nearly half of those were for a single episode: the “Buffy” pilot — surely a cooler reception than Facebook was hoping for.
Pictured above: HBO’s “Westworld”