Thursday, September 24

Could Facebook remake Hollywood?


TWO YEARS ago, Hollywood  talent agent Ari Emanuel made a  remarkable statement about the  future of media.

He said he could  see a time when certain movies  premiered on Facebook instead  of in theatres.

“For the US$150  million movie, you’ll still need to  go to Warner Brothers, but for  the US$25 million movie,  probably not,” he said at a San  Francisco conference.

After a decade of war with  Silicon Valley, big chunks of  Hollywood’s establishment are  thinking about technology differently.

Instead of freaking  out about how high-tech  companies will drain their  pockets, Hollywood executives  are increasingly looking at deals with firms such as Facebook,  Google, Apple and Amazon as a  way to line them.

As we spend  more time online — almost as  much time as we spend watching  television, according to Morgan Stanley — these companies are becoming TV networks for the  digital age.

They are hugely valuable advertising and  distribution engines for  Hollywood content.

The initial public offering  documents that Facebook filed  this past week reveal just how big  an advertising and distribution  juggernaut it has become.

The  company said that last year it  made US$1 billion on US$3.7  billion in revenue, making it more  than twice as profitable as Google  was when it went public in 2004  and almost as profitable as the  CBS television network is today.

Facebook’s reach turned out to  be even bigger than previously  thought — it has 845 million  monthly active users (more than  a third of the Internet), 483 million  daily active users and more than  37 million fan pages.

Most of the  top-ranked fan pages are for celebrities such as Lady Gaga, but  there are companies on the list,  too.

The firm with the largest  number of Facebook fans, after  Facebook, YouTube and Coca-Cola? Disney — with nearly 32  million.

Going public is a seminal  moment for a company.

It means  the world gets to see once-private  financial statements.

Employees  and investors who have been paid  largely in stock or some other  illiquid compensation finally can  turn that into cash.

And most  important, the company can  suddenly buy things previously  out of its reach.

Not only does a  firm raise cash in an IPO, it gains  a currency — its stock — which  is often as legitimate as cash.  Facebook has US$1 billion in  cash now.

It will have at least  US$6 billion when its IPO is  complete later this year. And it’s  not hard to imagine where some  of that money is headed: content  deals with Hollywood.

Almost  from the day he started Facebook,  founder and chief executive Mark  Zuckerberg has talked about it as  a next-generation media  company.

It’s no accident that two of his six board members are  media executives — Netflix  founder and chief executive Reed  Hastings and The Washington  Post Co.’s chairman, Donald  Graham.

Already, Zuckerberg has signed  up Netflix, Hulu and the music  service Spotify as content-sharing  partners.

Meanwhile, studios  have been cosying up to the social networking site for more than a year.

Facebook has launched a  movie-rental application with  Warner Bros., debuting last year  with ‘The Dark Knight.’

Paramount has made its ‘Jackass’  films available for rental on the  site.

And last month,  Lionsgatemade its 2011 movie  ‘Abduction’ available to rent on  Facebook.  But that’s probably just a  glimpse of Zuckerberg’s ambitions.

Even for a company  with Facebook’s massive  distribution, true content deals  with Hollywood don’t get done  without hundreds of millions of  dollars changing hands.

As a  private company, Facebook  didn’t have that kind of money.

As a public company, it will have  it in torrents. Competitors Google  and Apple are already hard at  work on TV offerings.

Expect  Facebook TV — or whatever  Zuckerberg ends up calling it —  sometime soon as well.

It’s ironic that Facebook’s IPO  announcement came only a  couple of weeks after the flare-up  of hostilities surrounding  Hollywood’s online piracy bills.

Pundits and even a few Hollywood  executives have been openly  worrying about a return to the  bad old days of a decade ago, when  the recording industry sued  Napster out of existence and when  top executives at Disney and Intel  screamed at each other during a  2002 congressional hearing.

It is misplaced hand-wringing.

Silicon Valley, with its social  networks and mobile devices, has  enabled consumers to profitably  access entertainment content in  places that media moguls could  once only dream about — in line,  on the bus, in the elevator, in the  back of a car and even in the  restroom, as well as in a movie  theater and in front of the living  room TV.

The world’s eyeballs  are increasingly online. It is  where Hollywood — or anyone  who wants their content to be  widely seen — will go as well. —WP-Bloomberg