“Facebook and Chill?” Why Netflix Should Be Worried About Watch
Between YouTube and Facebook Watch, Netflix has a few reasons to be nervous.
PHOTO CREDIT: Getty Images
In case you missed it, Trevor Noah won an Emmy Award last month for a comedy special on YouTube. Yes, YouTube. The network once known for Evolution of Dance and Chocolate Rain has officially grown up.
Not only does YouTube now offer a slew of popular original films and series via the YouTube Red subscription service, they also stream live TV from the major cable channels, including ABC, NBC, FOX and ESPN, for around $35 a month. Indeed, a gaggle of A-list celebrities, from Ellen DeGeneres to Katy Perry and Kevin Hart, currently call YouTube home.
But as the network distances itself from its DIY roots, something strange has started to happen--a sort of Charlie-bit-my-finger vacuum has formed. Shaky hand-held clips, random viral hits and cheap-and-cheerful how-tos--in the past, the bread and butter of YouTube--now feel increasingly out of place. With the platform (and, inevitably, ad rates) going upscale, content creators and companies that advertise on YouTube are asking: where's the next stop?
For a few years now, the signs have all pointed to Facebook. It's no secret that the network has been steadily eating into YouTube's market. Two years ago, Facebook was already logging eight billion daily video views. And that was before the rollout of Facebook Live, which has turned the platform's two billion users into live broadcasters. Mark Zuckerberg has famously predicted that Facebook will be all video in five years time.
YouTube still logs more than one billion hours of video watched everyday, which is about ten times what Facebook generates. But Facebook has clearly captured a market with its aggressive video efforts. Judging from the torrent of clips that floods my newsfeed, it's no exaggeration to say that today's Facebook looks a lot like yesterday's YouTube.
The Netflixing of Facebook
In recent months, Facebook has moved aggressively to buy and commission longer-form, more polished video content. Not only has the network signed Buzzfeed, Vox and other producers to create original scripted shows, it also launched its new Watch tab this September in the U.S. Now, users can find and subscribe to video series, rather than just stumbling across them in the news feed.
So far, the focus is on easy-to-make reality series (including one that I have in the works, about young entrepreneurs pitching ideas), but the plan is to move to longer, scripted content. In fact, Facebook has budgeted more than $1 billion to the effort in 2018. One program that just wrapped its first Facebook Watch season is already garnering rave reviews as the best "queer comedy on TV."
So, should streaming video pioneers like Netflix be worried by these new threats from YouTube and Facebook? In the bigger picture, what's online video's end game? There aren't easy answers here, but what's becoming clear is that Internet video is maturing at a breakneck pace, and premium, high-quality content is increasingly emerging as the ultimate objective.
Netflix, for instance, is looking more and more like a full-fledged cable TV network, with a budget to match. The company spent $6 billion on content in 2017 and received nearly as many Emmy nods as HBO. Not far behind is Amazon Prime Video, the streaming service included free with Amazon Prime Membership, which shelled out $4.5 billion for programming in 2017. Then there's Hulu, old-school TV's version of a streaming service, which has budgeted $2.5 billion for content.
Meanwhile, YouTube and now Facebook are moving into the niche once occupied by Netflix--shifting focus from viral and DIY content to longer programming and scripted shows. Snapchat, at least for the moment, still derives a significant chunk of its ten-billion-plus daily video views from user-generated content, but its Discover channel's scripted and network programming is eating away at that.
Equally interesting--and unresolved--is how all these platforms plan to recoup their content investments. Netflix, of course, has eschewed advertising and committed itself to a paywall model, convinced that subscribers will continue to shell out for top-notch shows. (At present, this strategy translates to multibillion-dollar annual losses.) Hulu's tiered pricing structure has users pay one fee for basic access, with a surcharge to ditch the commercials.
Facebook, by contrast, is and will forever be a free, ad-driven network--betting (like good old network TV) that users will gladly stomach ads in exchange for free video. But the most interesting model of all may well be Amazon Prime Video. As pretty much just a deal sweetener to get people to sign up for Amazon Prime, it doesn't really have to make money, at all, as long as it's driving Amazon sales. Ah ... the power of vertical integration.
Despite the jostling over models, there's one fundamental that no one's debating: video is the future. By 2020, 82% of consumer internet traffic will be video--enough must-see TV for a lifetime.
BY Amanda Pressner Kreuser