What Facebook’s SVOD Experiment Signals For the Future

“They’re going to have to…figure out how they expand to not just be mobile-only,” Conviva’s Vice President of Strategy Nick Cicero tells TheWrap

Facebook’s recent decision to use its platform to sell subscriptions to partner video services may be the solution to one of the streaming industry’s biggest obstacles — discoverability. 

While the new initiative is starting off with a small group of partners in the U.S. — BritBox, MotorTrend, CollegeHumor, and Tastemade — the results could lead to future opportunities for other small-to mid-sized services.

One of the largest problems for those streaming services has been the ability to cut through the crowded space, with an estimated 200 services on the market and more than 5000 streaming apps available on Roku, the leading streaming player.  

“I’m surprised Facebook hasn’t done this already,” Parks Associate analyst Brett Sappington told TheWrap. “They have a huge following, and they know what people like. So why not have a way to be able to steer people towards particular service?”

Facebook is expected to take a cut of each subscription it generates for its video partners, according to the Wall Street Journal.

 

Just as it does with advertisements, the data-rich company could potentially suggest streaming services that match its users’ viewing and engagement habits. This targeting can mean big things for niche players like BritBox, MotorTrend, CollegeHumor, and Tastemade. Unlike Netflix, these companies have very specific content libraries that don’t appeal to everyone. Facebook’s data could let these partners address their target audiences in a more efficient way. 

For example, BritBox describes its core audience as women age 45 and over who live in the South and Midwest and are Anglophiles (greatly admire England). Facebook’s data would allow the streamer to weed through the hundreds of millions of Facebook users in the U.S. to connect with this specific group. 

In addition, brands like Tastemade and CollegeHumor will be able to better leverage their highly engaged Facebook followers by introducing them to their services directly from within the platform. 

“They start with this audience of millions of users already that they can go out and reach in very low-cost ways,” Conviva’s Vice President of Strategy Nick Cicero said. And so if they are able to convert even a fraction of them, they’ll actually have a strong subscriber base.” 

Having a large base of daily active users is one of the most important factors to being a successful aggregator, says Sappington.

“You have to have enough eyeballs going through your system to be able to steer some to interesting content,” he said. “That’s why Amazon’s been successful. They have hundreds and hundreds of millions of people through their online retail store and so they can easily show ads for services and really steer people towards those services.”

Facebook declined to discuss the financial model of the experiment but said it will adjust the experiment, as needed.

“We are in the early days of this video subscriptions test, and we are learning with our partners,” a Facebook spokeswoman told TheWrap. “These partners are all long-term, existing partners. We work hand-in-hand with them for their work in connecting communities and fans across our platform.”

While Facebook’s massive user base and deep pockets are important, the social media giant has yet to have a presence on connected TVs, where most premium viewing takes place.

On-demand viewing on PC has increased 165% over the past year, though it accounts for just a 16.5% share of the total on-demand viewing that took place in the second quarter of this year, according to a report from video analytics company  Conviva. This is in stark comparison to connected TV’s 56% share, which continues to increase year-over-year. Mobile viewing, meanwhile, accounts for 22.3% of viewing, according to Conviva.

“One of the things that they’re going to have to do is figure out how they expand to not just be mobile-only,” Cicero said. “Because to have a great streaming experience, you also want to bring people to the big screen in the living room.”

For many OTT viewers, the big screen has become the preferred way to watch premium content. For example, 70% of Netflix subscribers stream content on connected TVs, while 90% of Xumo users stream on TVs, according to the company. 

“The television is the first viewing screen of choice for consumers. If they can watch it on the big screen they will,” Sappington said. “I think the challenge for Facebook is that people are going to want to watch [these services] on the television.”

Because Facebook’s business revolves around keeping people on its platform for the longest period of time possible, not having a presence on connected TVs could pose a challenge for the company.

“If they’re pushing people to other screens or incenting them to spend their time in other ways that are not on the Facebook platform that essentially prevents them from being able to monetize that time or those habits,” said Sappington, who noted that while a connected TV presence could be beneficial for the initiative, it won’t hinge on it.

While Cicero agrees that the initiative’s ultimate success won’t rely on the connected TV alone, he says product development or a hardware type solution is something the company will need to look into, which it may already be doing. According to a report from The Information, Facebook plans to launch a streaming TV device of its own sometime in the coming year.



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