In this photo illustration, a Facebook logo is displayed on a smartphone.
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Facebook plans to turn its product into a pay-per-view option for sports leagues that broadcast games on the platform for live online events.
According to Facebook, businesses, including sports companies, can make more money in a changing consumer landscape for content.
The social media giant envisions high school sports teams and minor leagues leveraging the feature that allows users to make cash for virtual participation and keep ticket winnings – for now. And Facebook wants to invest paid online events, the live streaming feature that allows you to pay for a virtual “ticket” to watch, much like pay-per-view over cable.
For decades, media networks like HBO and Showtime have used pay-per-view fees, especially for boxing. WWE and mix martial arts company UFC have also made money from pay-per-view events. And the business model is just that: pay to see an event, no subscription required.
“I think pay-per-view is by no means endangered,” said Rob Shaw, Facebook director for sports media and league partnerships, in an interview with CNBC. “I think that’s something that helps breathe new life into it. People are willing to pay to see a moment.
“One thing struck me,” he added. “I don’t think people are ready to start subscribing right away.”
Since launching last August, Facebook announced that online paid events are available in 44 markets around the world, including the US. In its earnings report last month, Facebook reported 2.85 billion monthly active users and 1.8 billion daily active users. Hence, Facebook has a built-in audience for this feature to work.
According to Facebook, users are requesting access to host an event and must first pass the integrity checks. Once approved, Facebook will also monitor events to prevent explicit content. Businesses and users can host live streams for moments, including course-like events like cooking, game tournaments, and new product launches.
Second and third tier sports leagues and high schools can also use the paid function to attract visitors. Facebook said it saw positive results for in March Challenge Miami, a professional triathlon event. Users bought tickets for $ 2.99 each and the event drew over 17,000 people. That is more than the event draws in person, and 70% of the people were watching from outside the US.
Yoav Arnstein, director of product management at Facebook, said the race came when the company knew that paid online events had growth potential and that organizers could make money around the world.
“That shows the ability of sports infusion – to extend its reach beyond the current location of the event, which is enormous,” said Arnstein.
And Facebook saw the success of live streaming on its platforms throughout the pandemic with events like Verzuz, which brings notable music stars together in a battle-style event on Instagram. After building the live streaming audience, Verzuz sold to streaming company Triller, which has spent over $ 250 million on streaming platforms and content over the past six months, according to one familiar with the acquisition. The person spoke to CNBC on condition of anonymity as they had no authority to speak publicly about Triller’s deal. Additional platforms like OnlyFans also prove that users have an appetite for monetizing peer-to-peer content. And now Facebook is looking behind the pandemic with its live streaming products.
Shaw called paid online events “another tool in our suite of monetization products that allows you to monetize your content directly.”
Neil Patel is the Chief Marketing Officer at NP Digital, a marketing agency that works with companies like Facebook, Google and NBCUniversal, the parent company of CNBC.
To test paid online events, NP marketed events that offer a similar live streaming product, according to Patel. The company targeted consumers for the same event, sending half to a third-party website and others to Facebook. He said paid online events generated 28% more revenue for content creators than third-party services.
“The conversion rates are higher. It makes yours [return on investment] Much higher up as a content creator and you’re more likely to use it, “said Patel.” Who doesn’t want 28% more sales? This is just a better and more economical way to reach more people. “
Online paid events also have a retry feature that allows users who missed the live session to pay and watch later. According to Arnstein, Facebook needs to add more engagement features to differentiate paid online events from its free streaming products. Facebook is also testing a geofencing feature that allows hosts to target specific regions where they want events to be streamed.
Here professional sports teams can one day benefit from this at the local level.
A television video person uses an iPhone and stabilizer to film for a live broadcast on Facebook prior to the game between the Syracuse Orange and the Louisville Cardinals on September 9, 2016 at the Carrier Dome in Syracuse, New York.
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A new playbook for the future
Here, too, Facebook sees success with smaller sports companies that use the product like an indoor soccer company (Major Arena Soccer League). Broadcast media rights restrict top sports leagues like the National Football League and the National Basketball Association to streaming live games on Facebook.
While the leagues are locally secured on the national front, their clubs need to get creative as the regional sports network’s business model has to fight the cable cutters.
Trying to bypass television would take a lot of red tape, and RSN fees are still critical to a pro team’s annual revenue. Facebook’s geofencing would help, however, as sports clubs could restrict live streams within their market reach to support target areas outside of North America.
Outside of games, clubs could monetize other content like team exercises and other behind-the-scenes videos. Shaw calls it “developing a new playbook” for future monetization.
“I think any league and media company will do that,” Shaw said. “It’s going to be a challenge figuring out how they can thread the needle to do this. But when they do that, on the other hand, there is an opportunity to engage and interact with a completely different audience, than those who would watch it on TV.
“The new marketer’s game book,” he added, “is about reaching and engaging with an audience that you can then use to increase business results.”
The logos of Google, Apple, Facebook, Amazon and Microsoft are displayed on a mobile phone with an EU flag in the background.
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For the time being, content creators will receive 100% of revenue from tickets for a paid event. If there is no extension, it will end in August. Facebook does not currently charge any fees Apple and Google have taken a hiatus to give hosts a break during the pandemic. However, Facebook assumes that the tech giants may charge in-app fees and pass the costs on to users.
When asked how the fees would work, Arnstein told CNBC that the company would provide updates on the fees in the coming weeks and declined to elaborate on them. And it’s not clear if Facebook could incorporate ads into its paid streaming. Arnstein reiterated that the product is still in its early stages but said he was “optimistic” about the future of paid online events, which are a mainstay of sports consumption.
“Facebook is pushing this hard and I think they will take the lead in the end [in paid live streaming]. What I see is they are trying to search for TV stations and channels straight away, “Patel said.” They’re trying to get attention, whether online or offline – they want it. “