Facebook and Hollywood: A Match Made in the Metaverse?

Screenshot via Facebook
Mark Zuckerberg in the metaverse
Matthew Belloni
December 3, 2021

Remember when Facebook cared about Hollywood for 10 minutes? What if Mark Zuckerberg were forced to actually get serious about professionally-produced content?

Not possible, you might say. Zuckerberg learned his lesson. After committing in 2017 to spend “up to $1 billion” on TV-quality shows, many of them scripted, Facebook mostly floundered with its “premium” entertainment. It released a slew of star-driven series you never knew existed—remember Juliette LewisSacred Lies or Jessica Biel’s Limetown? Of course not—and one show, Elizabeth Olsen’s grief drama Sorry For Your Loss, that you probably heard was good but never remembered to check out… because it was on Facebook.

Turns out platforms matter. People didn’t want to watch Netflix on the site where they fight with their aunts, just like people didn’t watch Cobra Kai when it was on YouTube and did watch when it moved over to Netflix. By January 2020, Facebook’s whole scripted experiment was over. Zuckerberg returned his content focus to virtual reality and augmented reality—and fomenting anger and misinformation-based political chaos, of course—leaving only cheap talk shows and unscripted fare as remnants of the “premium” push.     

But here’s something interesting: Facebook still includes language in its deals with producers that carves out specific rights in the event that Facebook decides to launch a Netflix-style subscription video on demand service. On most of Facebook’s current shows—think Jada Pinkett Smith’s Red Table Talk on Facebook Watch, or Cardi Tries with Cardi B on Facebook Messenger—Facebook pays producers a small fee plus a revenue share of advertising, once the show breaks even and Facebook takes a little premium. According to a few dealmakers I consulted this week, the carve-out specifically excludes producing partners from receiving a piece of any future SVOD revenue. And two separate reps told me Facebook lawyers recently have been paying more attention to that language (though a Facebook spokesman said there’s been no recent added attention).

I mention the SVOD carve-out not because it’s odd. After all, Netflix might pay Jane Campion or Adam McKay a rich fee plus a backend buy-out, but it sure as hell isn’t giving them a piece of Netflix subscriber revenue. The Facebook language is intriguing mostly because of what it suggests might exist in the future at a company that reaches billions of monthly active users. Sure, lawyers in the content group could just be covering their collective asses. But a more likely scenario is that Zuckerberg is figuring out what Facebook will look and feel like in the future, and a subscription video service—or some next-generation version of one—might make sense someday soon.

That’s especially true given Zuck’s recent announcement that Facebook—sorry, Meta Platforms, Inc.—is now a “metaverse” company, meaning it wants to create and, importantly, control the digital environments in which everyone will someday work, play, shop, interact and, yes, consume professionally-produced entertainment. If so, becoming a more robust purveyor of original content would almost necessarily play a big role in Facebook’s strategy. And if that’s the case, the reverberation across the entertainment and gaming ecosystem would be gigantic.

Talk to talent dealmakers and they’ll rattle off the many reasons why Facebook’s Hollywood foray did not go well, but it wasn’t because stars were unwilling to take Zuck’s money. I remember back in 2017, the creative community was actually salivating, despite the constant negative noise around Facebook’s ethics and business practices. That Ricky Gervais joke from the Golden Globes rang true: “If Isis had a streaming service, you would be calling your agents.” 

At the time, Amazon was spending billions on high-end scripted content without any discernible business necessity, and Apple was planning the same, as was Google’s YouTube (that botched effort—or multiple separate efforts—is an entirely different column). It was a tantalizing proposition: How might Facebook, one of the biggest advertising platforms on Earth, be able to amplify and monetize the best storytellers on Earth? Analysts certainly predicted a shot in the arm for entertainment. “Our read-through is that Facebook is likely willing to spend billions of dollars to buy rights for content that might otherwise appear on TV,” GroupM’s Brian Wieser wrote at the time.

Not quite. Amazon and Apple—say what you want about their hit-and-miss programming strategies—actually came to Hollywood to play. Both have hit bumps, but at least they devoted the required resources, hired well-known content executives, and opened large L.A. office hubs near traditional studios to become part of the creative community. Jeff Bezos hosted filmmaker parties at his house and sipped tequila at the Governors Ball. Eddie Cue signaled to the agencies that Apple was serious by poaching experienced buyers Zack Van Amburg and Jamie Erlicht from Sony.   

Facebook didn’t really do that. It bought some shows, made a few big-ticket deals, rented space in Playa Vista. But it all felt like a toe-dipping exercise by a tech C.E.O. that was pretty happy with his amazing surveillance-based ad business and wasn’t quite sure if he wanted to deal with Hollywood people. One big producer who made a couple shows for Facebook told me this week that he witnessed the internal divide personally: Content group execs were supportive, but others didn’t even want premium scripted content on the platform at all because it diverted attention away from the user’s core scrolling activity, thus reducing ad revenue. Not a good look if you’re trying to work with high-end talent.   

Still, the Facebook content push did generate a legitimate zeitgeist hit in Red Table Talk, now in its fourth season. According to a well-placed source, the show, produced by Will and Jada Pinkett Smith’s Westbrook Inc., cost $1.2 million per episode to produce last season, its third. Presumably, that price went up this season. Facebook also lets Westbrook hang onto ancillary rights, like audio (they did a big deal with iHeart), as well as merchandising, and the ability to do off-platform licensing. One source told me the show is still not profitable for Facebook, which really surprised me (Facebook wouldn’t comment), and that the ad rates Facebook is able to charge for it aren’t anywhere near what a traditional television or even an ad-supported streamer like Hulu or Peacock can get (that didn’t surprise me, given the lower rates for digital in general). 

But Facebook has evidence that people who watch Red Table engage more on the platform, which, as we know, is the ultimate goal for Zuckerberg. The Red Table page has 12 million followers, and the Smiths often spark conversations that take over the community. A spinoff with the Estefans is said to perform well, as are separate chat shows with Taraji P. Henson, Steve Harvey and musician Becky G.

Despite this modest success, the truth is that premium content didn’t work for Facebook, and it doesn’t currently want to be a player in that world. But the metaverse might change that thinking. Zuckerberg is investing heavily in Meta’s Oculus VR headset, buying complementary companies for music simulation games (Beat Games), virtual world creation (Unit 2), and more. And he’s talking about how different the so-called Web3 will be from what we currently know; a fully immersive experience that incorporates the interactivity of gaming and social media with more traditional storytelling. In my opinion, that platform will demand premium content to fill it—and to distinguish it from rivals. It won’t just be games, and it won’t just be Willow Smith arguing with her mother.

I went into detail a couple weeks ago with metaverse expert Matthew Ball about what film and television I.P. might look like in this new world, so I asked him yesterday how Facebook’s content strategy might shift accordingly. The games analogy is the most apt, of course, and he noted the coming boom in interactive storytelling that will create opportunities for professional creators, not to mention the ongoing revolution in virtual production. “I would argue that while Hollywood spent 15 years catching up to Netflix, the streamer’s innovations … important though they were, will seem trivial to the transmedia/immersive experiences that virtual production will soon enable,” Ball told me. This shift will “forever dissemble the distinction between linear and interactive.”

That’s a complex way of saying the lines between virtual, real, games, social media, film and TV are all going to crumble into the metaverse. Facebook—and those 3 billion users—will likely be in the middle of the transition, as will several other competitors, game engines among them. Will Hollywood? Almost certainly yes. Zuckerberg may not love having to pay professional talent, and talented creatives may not love working for Zuckerberg, but it seems like that creator-platform team-up is all but ordained.