Facebook Reportedly Shut Down Its Streaming Service to Maintain Advertising Ties with Netflix
Newly unsealed court documents show that in 2018, Facebook executives slashed the funding of Facebook Watch in favor of an ad deal with Netflix.
As the world’s largest and most profitable streaming service, Netflix’s dominance leaves no room to question who the leader in streaming is. But how important was another global tech company in its rise to power? A new report from Gizmodo has details about the close relationship between then Netflix co-CEO Reed Hastings and key members of the Facebook team, including Mark Zuckerberg. The report outlines that Facebook agreed to effectively defund its streamer Facebook Watch in 2018 to help maintain a closer advertising relationship with Netflix, a deal that might have helped the streamer gain millions of new subscribers.
- Facebook Watch began creating original titles and seeking new licensing deals to build its presence as an on-demand streamer in 2017.
- The platform pivoted to social video in 2018, leaving its on-demand ambitions behind to keep advertising deals with Netflix worth hundreds of millions of dollars in place.
- At the time, Netflix had over 100 million fewer customers than it has today.
New documents unearthed regarding Facebook Watch have come to light as part of a class-action lawsuit against Meta, the parent company for both Facebook and Instagram. Plaintiffs in the case allege that Meta has a monopoly in the social media market, and as part of their argument, they claim that it blunted the effectiveness of its own video platform Facebook Watch in order to satisfy Netflix executives.
“For nearly a decade, Netflix and Facebook enjoyed a special relationship,” court filings from the plaintiffs read. “It is no great mystery how this close partnership developed, and who was its steward: from 2011-2019, Netflix’s then-CEO Hastings sat on Facebook’s board and personally directed the companies’ relationship…”
In 2017, Facebook Watch began developing original series, in some cases headlined by big-name Hollywood stars. The next year, it tried to license “Dawson's Creek” to stream for Facebook users, and it also added news programming from ABC, CNN, Fox News and other outlets.
But that’s as far as things went for Facebook Watch’s ambitions to be Netflix’s biggest competitor. Netflix was a big-time advertiser for Facebook at the time, and plaintiffs in the lawsuit against Meta allege that Mark Zuckerberg hobbled the service to maintain deals that were worth hundreds of millions of dollars to the social media platform. Zuckerberg personally emailed Facebook Watch’s chief Fidji Simo in May 2018, informing her the budget was being slashed by $750 million, which was an effective end to the platform’s ambitions as an on-demand video service.
This period saw a corresponding increase in Netflix’s ad spend on Facebook to $150 million by the end of the year. By early 2019, it had been boosted to over $200 million, suggesting that some linkage between the wind-down of Facebook Watch and a jump in the ad dollars flowing from Netflix to Facebook may indeed have existed. In 2020, Netflix became available on the Portal TV device, a set-top streaming box brought to market by Facebook, further deepening ties between the two companies.
Did the Disabling of Facebook Watch Help Netflix’s Growth?
It’s easy to forget that in 2018, Netflix’s only material competitor in the streaming business was Hulu. Paramount+ was still called CBS All Access at the time. Services like Apple TV+, Disney+, Max, and Peacock did not exist at all.
Netflix had 124.3 million subscribers in 2018, an impressive number but a far cry from the 260.28 million it claims today. Did an agreement with Facebook to boost Netflix ads on the platform in exchange for the transition of Facebook Watch from an on-demand video streamer to a social video site help Netflix gain scale in the past six years?
It’s impossible to say for sure, but the trajectory of Facebook Watch since then is telling. In 2019, Facebook began testing another on-demand streaming platform with content from MotorTrend, Tastemade, and BritBox, but nothing came of this service.
The reach of Facebook shows that boosting Netflix ads could have had a material impact on the streamer’s subscriber base. In 2020, Facebook Watch drew 1.25 billion monthly viewers with live events, original shows, sports, news, music videos, and user-generated content. By this point, the streamer had already pivoted away from full-length, scripted original shows that Netflix had become famous for, and placing Netflix ads in front of the eyes of so many Facebook users could have driven big signups for the streamer.
Nowadays, Facebook Watch is increasingly subject to the pressures of an audience that is devouring short-form videos more often. In 2022, Facebook Watch was discontinued on tvOS devices, and has not been restored since. Facebook Watch has fallen far from the heights that many thought it would achieve and maintain in 2017, and court documents made public in recent days have potentially shed some light on why.
Netflix
Netflix is a subscription video streaming service that includes on-demand access to 3,000+ movies, 2,000+ TV Shows, and Netflix Originals like Stranger Things, Squid Game, The Crown, Tiger King, and Bridgerton. They are constantly adding new shows and movies. Some of their Academy Award-winning exclusives include Roma, Marriage Story, Mank, and Ma Rainey’s Black Bottom.