Watch out, Facebook’s about

The global TV industry, still dealing with the impact of Netflix and Amazon, is set to be disrupted by yet another play from an internet giant. Facebook Watch is the latest entry into an already competitive market, with Google and Apple also ramping up their efforts in content production. These cash-rich newcomers can afford to think big, too: With budgets of around $2-3 million per episode, the tech giants would be on an equal financial footing with many broadcast and cable networks.

So what is Facebook Watch?

Facebook Watch is a new video site to showcase content made specifically for Facebook. Initially, only certain people will be able to make shows for Watch, but the longer-term aim is for anyone to be able to create and post video content. Viewers will also be able to communicate with each other during the content streams. It’s not just in-demand content: Watch will feature shows that will air at regular times – such as a weekly professional baseball game. Aside from sports rights, which may yet become a bigger part of the service, Facebook is paying publishers like ATTN and Buzzfeed to make shows, although the plan is that  majority of shows will be posted on Facebook by the Watch community free of charge.

What does this mean for traditional broadcasters?

Given that Facebook has 2 billion monthly users, analysts are anticipating a shakeup of the market. Cable companies like A&E and WGN have responded to the already crowded landscape by announcing they are getting out of the scripted TV business, but there will still be plenty of content to fight over, given the forecast of over 500 scripted TV shows for the year – double the number six years ago. Broadcasters and networks will face increasing competition given the funds available to the newer entrants. In context, while HBO is working with an annual budget of around $2-3 billion, Netflix plans to spend about $6 billion this year – numbers that are likely to cause concern for traditional buyers of content.

However, industry insiders question whether Facebook will be able to effectively turn itself into a content destination where users go to watch high-quality longer-form content. In addition, if broadcasters respond to Facebook Watch by removing their own content from Facebook, the platform may become less popular.

What is the business model for  Facebook Watch?

Some publishers have plans to run adverts during the shows to generate revenue  and this is expected to have consequences for SVOD services and may mean that Facebook Watch leads tech firms into an era of AVOD models.

This strategy means that analysts are also anticipating a shakeup around advertising revenues. Industry insiders expect Facebook Watch to compete for broadcasters’ VOD ad revenue for several reasons. Facebook’s user base offers a ready audience at scale, Facebook’s data collection allows advertisers to specifically target ads, and its ability to distribute to 200 countries at once offers ease and efficiency. Broadcasters who have used Facebook as a means of marketing and acquiring an audience may have, ironically, helped Facebook to emerge as a competitor on a global scale.

It will  take some time for the impact of Facebook and other tech giants’ entry to be seen, but it is highly likely that as the new ‘content wars’ escalate, consumers are likely to be the only undisputed winner.

For now, we say, (Facebook) Watch out…

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About Resham Kotecha

Resham Kotecha is a Consultant at MTM, working in the Strategy team. With past experience in politics and finance, she brings a range of skills to her work, helping some of the biggest brands in the media and telecoms sector on strategic projects.