Why Facebook Is Looking To Acquire Music Rights

by Trefis Team
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As it continues to push video content on its platform, Facebook (NASDAQ:FB) recently rolled out a new tab on its website termed “Watch”, dedicated for viewing videos (Read Can Facebook’s Watch Become An Effective Competitor To YouTube?). Watch has been rolled out to all users in the U.S. and is focused on original content uploaded by users or created by publishers. The platform is aimed at attracting video advertisers to Facebook’s platform by attracting viewers towards engaging original content. In order to encourage users to upload more videos and legally use songs in these videos, Facebook is now reportedly entering into contracts with record labels. According to Bloomberg, the company is offering “millions of dollars” to music companies to allow its users to use songs in their videos. Without such contracts, it would be illegal for users to upload videos using copyrighted songs. Facebook’s intention to acquire music rights indicates that the company is willing to invest significantly in its video platform in order to attract video advertisers.

See our complete analysis for Facebook here

Original Programming Key To Driving Video Ad Revenues

As Facebook looks to compete effectively with YouTube in the video segment, the company is focusing on original programming to drive revenues. User driven content has been the primary engagement driver for Facebook, and the company is looking to use the same strategy for its video tab. Users would likely spend more time on the Watch tab watching videos uploaded by their network (which could include personal videos), and then can be gradually encouraged to watch other original content created by publishers – which could have sponsors and advertisements. Facebook’s strategy to engage users with content that is more personal to them and then directing them to other similar content has worked with its NewsFeed, and the company is looking to adopt the same strategy for videos. However, a major hurdle in the case of video is that the content would have to be taking down if users use music which is copyrighted. Hence why Facebook is looking to enter into contracts with music labels.

Video is projected to make up 82% of all internet traffic by 2021, according to a Cisco forecast.  This has led to increased ad spend on social video, which is likely to be around $4 billion in 2017, increasing consistently in the coming years. Facebook is looking to gain a significant portion of this growth, and with strong competition from YouTube, higher user engagement will be a key factor. Facebook’s strategy to engage users better with original, user created videos should work, and these music rights are likely to be a crucial element.

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