Commentary
What If Facebook Adopted The Current TV Model?
- by Wayne Friedman , Staff Writer, April 10, 2018
Users want Facebook, but don’t want their personal data bandied about by everyone in town -- including proper Facebook advertisers that use anonymous data.
Sheryl Sandberg, COO of Facebook, says be ready to pay for it. Like a pay service. Think HBO. Think Netflix.
Now, one might think at around $10 a month -- the going price for HBO and Netflix -- that’s not a problem. Millions of people already pony up. In Netflix's case, it counts 55 million U.S customers.
It wouldn’t match up to the 240 million Facebook users in the U.S. -- or the 2 billion globally. There is always business math juggling to consider.
Facebook is free. Media consumers may feel -- up to a point -- that this is similar to broadcast TV networks and stations. It’s free as well, if you are not getting those networks/stations via a pay TV service.
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In either case, advertisers pay.
Mind you, Netflix doesn’t have your deep personal data (maybe, a credit card) like Facebook. But it does know what kind of TV shows you like and produces TV shows catering to its audiences. HBO and HBO Now do as well.
Starting a social-media platform from scratch -- as a pay service -- would be catastrophic. However, Facebook may be a different media animal. Consumer usage in social media is massively embedded into daily behavior for many -- it's the big attraction from marketers to buy in.
Free media platforms? Not really. Remember the transition broadcast networks went through in the 1980s and 1990s -- with cable networks -- by pay TV providers, cable operators, satellite and telco operators? Now they get big retransmission fees, via pay TV operators, via consumers monthly fees.
But the difference during those years -- and now -- is that consumers haven’t sent a check each month to CBS, NBC, Fox, or The CW. It went to another party.
For argument's sake, it would be a different matter if Facebook started invoicing its users. If Facebook charged $1 a month, that would mean $240 million a month -- just under $3 billon a year -- from 240 million U.S. users.
This might be a starting point -- but not an end point: Facebook pulled in around $40 billion a year in advertising revenues in 2017.
Does Facebook want to be a TV network, after all -- even after its big non-TV advertising success? After all, what do broadcast and cable networks do now? They get a fee from pay TV providers (via subscribers) and from selling advertising.
Wayne Friedman is West Coast Editor of MediaPost. You can reach Wayne at wayne@mediapost.com.
Wayne, I assume that Netflix's 55 million U.S. subs translates into about the same number of homes as very few households maintain two subsciptions to this SVOD service. As for FB, its 240 million users probably translates into anywhere between 60-75 million homes---nobody but FB knows for sure. If FB were to try to go the subscription route, it would probably consider a household subscription approach rather than an individual one, with all members having access, as this would probably be an easier sell and even if one member was opposed, the other residents might over rule the negative one and subscribe anyway. How many would subscribe? That's a more difficult one as the deal would probably be layered with a higher price for no-ads and/or privacy and a lower price for ads and no privacy. My guess is that FB would lose about half of its users and a substantial amount of ad dollars---but would the trade-off in subscription incomes make up for this? Maybe.
Anytime you ask somebody to pay for something they've been used to receiving for free, say goodbye to 95%+ of users. They won't go to a 100% paid model. They'd lose almost all subscribers and it would destroy their P\E value from Wall Street. They'll end up with a Hulu-type model and offer a "free with ads" model and a "pay \ no ads" model. This protects them from the gov't and still allows them to sell most of their customer's data who will opt for the free model.