Zuckerberg’s $1 Billion Bet on Making Facebook ‘Video-First’

Facebook reportedly will spend up to $1 billion on original content through 2018, an investment aimed to fulfill chief executive Mark Zuckerberg’s goal to make the platform “video first.” In doing so, Facebook faces stiff competition from broadcasters such as HBO, Amazon and Netflix, all of which are focused on creating premium video content to capture advertising. Zuckerberg has been opposed to paying for content, but now has said he will do so, although he believes most creators will earn via a revenue-sharing model.

The Wall Street Journal notes that, “Facebook is trying to set itself apart from a crowded market with programming that its two billion monthly users will want to discuss — preferably on the social network.”

Facebook_Apple_TV_Stream

“Our read-through is that Facebook is likely willing to spend billions of dollars to buy rights for content that might otherwise appear on TV,” said Pivotal Research analyst Brian Wieser.

Facebook is also focusing on sports, bidding more than $600 million “for the digital rights to stream cricket matches in India from 2018 to 2022, according to a tweet by the Indian Premier League.” Facebook lost that bid to 21st Century Fox’s Star India, “which bid $2.6 million for broadcast and digital-streaming rights.”

Wieser noted that, “Facebook’s cricket bid was eye-popping given the relatively small size of Indian digital ad market,” comparing it to “spending $24 billion in the U.S., where the online advertising market is 40 times as large as in India.”

Facebook is also actively seeking to ink deals for music playing in the background of videos that users upload, and is “prepared to pay hundreds of millions of dollars for the rights,” according to one source. Negotiations for music have been ongoing for years, but another source reports that, “Facebook hopes to wrap up negotiations this year.”

WSJ reports that, in July 2016, when Zuckerberg first voiced the goal to make the platform video-first, he asked company executives to determine “how Facebook would fare if it spent Netflix-level money on original programming.” The executives determined that “the strategy wouldn’t play to Facebook’s strengths.”