Facebook + Netflix = Sense
Markus Kavka
This has not made more sense since the time of the Theory of Relativity” is a line that one of my favorite German TV hosts Markus Kavka uses to promote his music show. And if Mr. Kavka used this comment to describe a possible takeover of Netlfix by Facebook, he would be absolutely right. Here’s Why.
First and foremost, Netflix is in need to find a buyer or at least an investor to keep sustaining its ambitious plans for content production among growing competition and evermore capricious and demanding clients around the world. Netflix has no other choice because if it fails to deliver big volumes of new original (local) shows, their clients would simply move to other similar services. Another threat for the VOD giant is the fact that its library of acquired content still attracts the biggest interest of its users. Long-term, things don’t look, as the company will start losing rights to shows and its audience will start shrinking.
One obvious solution to fill the opening cash hole could be introducing advertising. But Netflix is very adamant that this will never happen. Still, a recent estimate based on US TV ad rates has shown that the company loses more than $2.2 billion every year for not showing ads. This means it could potentially increase its revenues by a quarter to over $10 billion a year but even this move would not be able to sustain the company’s long-term strategy. Another problem is that ads could lead to a customer decline as research has shown that Netflix users would rather pay more than use an ad-funded service.
So, the only solution is finding a buyer, but it must be a very special buyer - not just a big media company but a giant with a global audience reach. And here comes Facebook with its 1.5 billion users around the world and a growing hunger to offer them “all the content that they’re interested in”, as CEO Zuckerberg pointed during an earnings call. My rhetoric question here would be “Which is the biggest content supplier in the world, Mr. Zuckerberg?”
Yes, it makes sense. I know.
And I also know how it could work both for Netflix and Facebook. Taking control of Netflix’s library, Facebook would be able to easily promote the shows to its multi-billion audience and significantly increase the sales of the VOD platform. Additionally, Facebook will be able to hold “free” world premieres of all major shows coming up on Netflix, with advertising attached, of course. There is no need to make the whole library free to watch. Single, special episodes and world premiere events would be enough to drive ad sales for Facebook by up to $2 billion a year and guarantee a wider reach and sustainable user growth for Netflix. Through this single acquisition Facebook will not only be the biggest social network but also the biggest entertainment platform in the world.
So the question is not Why? but When?
“With this in mind, we have again learned something. Thank you very much for the attention. Goodbye,” Mr. Kavka concludes his Kavka Deluxe.
First and foremost, Netflix is in need to find a buyer or at least an investor to keep sustaining its ambitious plans for content production among growing competition and evermore capricious and demanding clients around the world. Netflix has no other choice because if it fails to deliver big volumes of new original (local) shows, their clients would simply move to other similar services. Another threat for the VOD giant is the fact that its library of acquired content still attracts the biggest interest of its users. Long-term, things don’t look, as the company will start losing rights to shows and its audience will start shrinking.
One obvious solution to fill the opening cash hole could be introducing advertising. But Netflix is very adamant that this will never happen. Still, a recent estimate based on US TV ad rates has shown that the company loses more than $2.2 billion every year for not showing ads. This means it could potentially increase its revenues by a quarter to over $10 billion a year but even this move would not be able to sustain the company’s long-term strategy. Another problem is that ads could lead to a customer decline as research has shown that Netflix users would rather pay more than use an ad-funded service.
So, the only solution is finding a buyer, but it must be a very special buyer - not just a big media company but a giant with a global audience reach. And here comes Facebook with its 1.5 billion users around the world and a growing hunger to offer them “all the content that they’re interested in”, as CEO Zuckerberg pointed during an earnings call. My rhetoric question here would be “Which is the biggest content supplier in the world, Mr. Zuckerberg?”
Yes, it makes sense. I know.
And I also know how it could work both for Netflix and Facebook. Taking control of Netflix’s library, Facebook would be able to easily promote the shows to its multi-billion audience and significantly increase the sales of the VOD platform. Additionally, Facebook will be able to hold “free” world premieres of all major shows coming up on Netflix, with advertising attached, of course. There is no need to make the whole library free to watch. Single, special episodes and world premiere events would be enough to drive ad sales for Facebook by up to $2 billion a year and guarantee a wider reach and sustainable user growth for Netflix. Through this single acquisition Facebook will not only be the biggest social network but also the biggest entertainment platform in the world.
So the question is not Why? but When?
“With this in mind, we have again learned something. Thank you very much for the attention. Goodbye,” Mr. Kavka concludes his Kavka Deluxe.
