How Facebook is trying to pull a Netflix
Those following the ongoing travails of the digital journalism industry have likely read by now that Facebook has been making direct overtures to news companies — many of which rely overwhelmingly on the social network for traffic — arguing that because their mobile sites offer an inconsistent (read: terrible) user experience, they should host their news content within Facebook's ecosystem. In return for this handover of content, Facebook will share the revenue for any ads it sells against it.
Unsurprisingly, many have come to regard this offer as a Faustian bargain, one that will give Facebook even more power over news publishers until it can leverage that power to make them obsolete. Writing for The Awl, John Herrman argued that these publishers will give in by rationalizing the move as mere diversification of revenue.
Handing over a major source of revenue—not to mention analytics and audience data and the establishment of boundaries—to an outside platform might sound like a risky transfer of power. It would be! But a publisher might be able to dismiss that concern by pointing out that many publishers are already dependent on vendors and ad agencies they don't control, rather than directly negotiated advertising deals, and that the industry seems to be moving further in that direction, and besides, platform anxiety didn't really stop anyone from trying iOS apps, right?
It's easy to detect a heavy dose of skepticism in Herrman's writing — he's been a longtime critic of the viral content mill born in part to suck more traffic out of Facebook — but this wouldn't be the first time media companies will have handed over large amounts of valuable content to another platform: in fact, Netflix's entire business model is based on just this sort of transaction, and yet so far it has only added to media companies' bottom lines, providing an additional source of revenue generation.
When television networks syndicate the rights to their programming to Netflix, they're sending it into a black box where they can extract no user data — all that goes to Netflix — and at the same time they're giving cable subscribers that much more ammo to cut the cord and just consume media from Netflix. But so far, TV companies have not been hit as hard financially as other forms of media, including record labels and newspapers. For one, they've diversified their holdings, launching multiple channels across the cable dial (Fox owns Fox News, FX, and FXX). Also, Netflix has received competition from the likes of Amazon, Google Play, and Hulu, both in terms of viewers and for the rights to TV shows. And now we're seeing some channels launch their own standalone streaming apps. For the longest time you still needed a cable subscription to access them, but, with the launch of a standalone HBO Go app, we're likely to see others try out subscription services outside cable.
In fact, news publishers can learn a lot from how TV companies approach streaming services like Netflix and Amazon. For one, they don't hand over the entirety of their content offerings; you'll find plenty of NBC shows on Netflix but far from its entire roster. News publishers could set aside certain stories for Facebook while publishing many others exclusively on their websites. TV networks also produce some kind of delay between when a show airs on cable and when it's available on Netflix — this helps prevent them from cannibalizing their lucrative cable audience. News publishers could also delay uploading content to Facebook, giving its web version a headstart in collecting readers.
Most important, TV companies ensure their audience isn't dependent on just one platform. Their stations are available on cable, satellite, antenna (if they're one of the main broadcast neworks), Hulu, Netflix, Amazon, and their own websites and streaming apps. Though Facebook is certainly the most powerful of social networks, there are still large userbases present on major platforms like LinkedIn, Pinterest, Twitter, Email, Flipboard, and YouTube. Not to mention their ability to create their own standalone-apps for smartphones.
So while it's healthy to show some skepticism (as I have) when entering any kind of content partnership with Facebook, it'd be foolish to ignore the collective power of Facebook's engineering base and its success monetizing mobile users, especially as display advertising, the main revenue source for news publishers, performs so poorly on mobile. Turning away that revenue may hinder Facebook from gaining even more monopoly power over the internet, but it could just as easily mean cutting off your nose to spite your face.
Image via Grow Traffic
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This entry was posted in Uncategorized and tagged advertising, cable, facebook, john herrman, netflix on March 4, 2015 by SimonOwens.
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