Wednesday, June 22, 2016, 12:22 PM ET|Posted by Will Richmond
The WSJ is reporting that Facebook has signed deals with almost 140 media companies and celebrities, committing $50 million for guaranteed live-streaming content for Facebook Live. A straight average would value each partner’s deal at over $350K, but as expected, certain partners are getting a disproportionate share.
According the paper, the top 15 providers account for $21.4 million, or almost 43% of the total $50 million. At the top of the list are BuzzFeed ($3.1 million), NY Times ($3 million) and CNN ($2.5 million). I’d guess there are others at the bottom of the list whose deals are in the low 5 figures.
I’ve been enthusiastic about Facebook Live and see at least 5 reasons why the company investing $50 million (which is chump change given 2015 revenue of nearly $18 billion) is so smart:
1. Setting audience expectations for high-quality live-streams. The biggest risk Facebook Live faced was that it would quickly become perceived as little more than amateur hour with users streaming nonsense. Consider that years since YouTube has evolved from its UGC roots (how many “cat on a skateboard” references have you heard?) the company is still working hard to be seen as a legitimate high-quality platform. Showcasing branded content partners will help shape early opinion about Facebook Live, which has many downstream benefits.
2. Reinforcing video as Facebook’s primary content type. There’s no question video has become more strategic to Facebook, but still, last week’s quotes by its VP of EMEA that in 10 years Facebook will “probably” be “all video” was the most explicit signal yet that the company is shifting gears. With video becoming ever more important to Facebook’s future, Live has emerged as a key pillar and also a key differentiator.
3. Building positive relations with content providers in the face of intensifying competition. As Facebook’s model shifts to video, media partnerships are going to become increasingly important relative to user generated content, which has fueled the company’s rise. But it’s expensive to create quality video (live or on-demand) and Facebook’s payments acknowledge it can’t get something for nothing, especially from financially-strapped media companies. Further, media partnerships for video are a battle, with Snapchat, Twitter, YouTube and others all vying for deals.
4. Buying time until Facebook’s monetization model is fleshed out. Despite all of Facebook’s success in video so far, it’s amazing the company still doesn’t have fleshed out monetization options for video content providers, other than exposure. This is a critical piece to Facebook’s eventual video success and will no doubt be resolved soon. But until this happens, Facebook clearly needed to not only incent (see above) but also support its partners.
5. Improving Facebook’s image with content providers in the wake of freebooting PR fiasco. Facebook’s entry into video has included serious controversy, given its lax enforcement of copyright that spurred “freebooting,” whereby videos are stripped from YouTube and reposted on Facebook. While Facebook recently launched its “Rights Manager” tool, there’s still work to be done to prove itself a safe, well-lit place. Partnering with well-established brands for live-streaming will help burnish the Facebook brand as it tries to put the freebooting chapter behind it.
No doubt there are other reasons for Facebook’s live-streaming deals with content providers, but just based on these 5, the move looks very smart. There’s no doubt Facebook is going to emerge as an even more important player in the video industry as these and other investments pay off.