Facebook wants its pay-per-view model to be extended to sports

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Facebook has a plan to turn its live online event product into a pay-per-view option for sports leagues that broadcast games on the platform.

It’s a feature that Facebook says will help businesses, including sports companies, make more money in a changing content consumption landscape.

The social media giant powers high school and smaller league sports teams using the feature that allows users to monetize virtual attendance and keep ticket winnings — for now. And Facebook plans to invest in paid online events, the live streaming feature that lets you pay for a virtual “ticket” to watch, a bit like pay-per-view on cable.

For decades, media networks like HBO and Showtime have been using pay-per-view rates, especially for boxing. WWE and mixed martial arts company UFC also monetized pay-per-view events. And the business model is just that: pay to watch an event, no subscription required.

“I don’t think pay-per-view is in any danger of extinction,” Rob Shaw, Facebook director of sports media and league partnerships, said in an interview with CNBC. “I think this is something that helps revitalize it. People are willing to pay to experience a moment.”

“One thing has struck me, however,” he added. “I don’t think people are willing to start a subscription right away.”

Expand Paid Events

Since its launch last August, Facebook said paid online events are available in 44 markets worldwide, including the US. In its earnings report last month, Facebook reported 2.85 billion monthly active users and 1.8 billion daily active users. That’s why Facebook has a built-in audience to make this feature work.

Facebook said users request access to host an event and must pass integrity checks first. Once approved, Facebook also monitors events to prevent explicit content. Businesses and users can host instant live streams, including course-style events such as cooking, gaming tournaments, and new product launches.

Second and third level sports leagues and high schools can also use the paid feature to attract visitors. Facebook said it saw positive results in March for Challenge Miami, a professional triathlon event. Users bought tickets for $2.99 ​​each and the event attracted more than 17,000 people. That’s more than the event draws in person, and 70% of people watched from outside the US

Yoav Arnstein, Facebook’s director of product management, said the race was when the company knew that paid online events had growth potential, along with the advantage that event hosts could make money worldwide.

“That demonstrates the ability of sports infusion — to expand its reach beyond the current location of the event, which is huge,” Arnstein said.

And Facebook further witnessed the success of live streaming on its platforms during the pandemic with events such as Verzuz, which pairs notable musical stars with a battle-style event on Instagram. After building the audience for live streaming, Verzuz sold to streaming company Trill. Triller has spent more than $250 million acquiring streaming platforms and content in the past six months, according to a person familiar with the acquisition. The person spoke to CNBC on condition of anonymity because they were not authorized to speak publicly about Triller’s deal.

Other platforms, such as OnlyFans, further prove the need for users to monetize 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 line 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 partners with companies such as Facebook, Google and NBCUniversal, the parent company of CNBC.

To test paid online events, Patel said NP was marketing events that offer a similar live streaming product. The company targeted consumers for the same event, sending half to a third-party site and others to Facebook. He said paid online events generated 28% more revenue for content creators than third-party services.

“Conversion rates are higher. It makes your [return on investment] much higher as a content creator, and you’re more likely to leverage it,” Patel said. “Who wouldn’t want 28% more revenue? It’s just a better, more economical way to reach a lot more people.”

Paid online events also have a replay feature, allowing users who missed the live session to pay and watch later. Arnstein said 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 to stream events.

It is here that professional sports teams can benefit at the local level in the future.

A new script for the future

Again, Facebook is seeing success with smaller sports companies using the product, such as Major Arena Soccer League. Broadcast media rights restrict top sports leagues like the National Football League and National Basketball Association to live streaming games on Facebook.

But while leagues are secured on the national front, their clubs will have to be creative locally as the regional sports network, or RSN, must battle its business model against cable snipers.

Attempting to get around TV would involve a lot of bureaucracy, and RSN fees are still crucial to a pro team’s annual revenue. But Facebook’s geofencing would help, as sports clubs could restrict live streams within their market reach to help areas outside of North America.

And outside of games, clubs can monetize other content, such as team training and other behind-the-scenes videos. Shaw calls it “developing a new script” for future earnings.

“I think this will catch on in every league and every media company,” Shaw said. “It’s going to be a challenge to figure out how to thread the needle to be able to do this. But once they do, on the other hand, there’s an opportunity to address a very different audience than those who would watch it on television.”

“The new marketer playbook,” he added, “is all about reaching and engaging an audience that then empowers you to drive business results.”

What about the fees?

Content creators currently receive 100% of the revenue from tickets to a paid event. But unless an extension happens, it will end in August. Facebook is not currently charging as Apple and Google have paused the discount they take from the events to give hosts a break during the pandemic. But Facebook expects the tech giants to eventually charge in-app fees and pass the costs on to users.

When asked how the charges would work out, Arnstein told CNBC that the company would provide updates on the fees in the coming weeks, and declined to elaborate. And it’s not clear whether Facebook could include ads with its paid streaming. Arnstein reiterated that the product is still in its early stages, but said he is “bullish” about the future of paid online events as a mainstay in sports consumption.

“Facebook is pushing hard on this and I think they will eventually become the leader.” [in paid livestreaming]’ said Patel. ‘What I see is that they are going after television channels and broadcasters directly. They’re trying to grab attention, whether it’s online or offline — they want it.”

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