Original content is all the rage right now, and while it makes perfect sense for some companies, the strategic value of investing in original video content can be questionable in the context of other companies and their businesses.
Recode reports that social network Facebook (NASDAQ:FB) is now exploring potential deals with studios, producers, and other content creators about bringing original content to Facebook's video platform. That could potentially include things like game shows and scripted shows, and maybe even some sports. The company is also looking into licensed content in addition to original content. Recode obtained this statement from Facebook's Ricky Van Veen, who was hired over the summer to help grow the video business:
Earlier this year, we started rolling out the Video tab, a dedicated place for video on Facebook. Our goal is to kick-start an ecosystem of partner content for the tab, so we're exploring funding some seed video content, including original and licensed scripted, unscripted, and sports content, that takes advantage of mobile and the social interaction unique to Facebook. Our goal is to show people what is possible on the platform and learn as we continue to work with video partners around the world.
With all of that in mind, does it make sense for Facebook to invest in original video content?
Only if it's to jump-start the video platform
It sounds like what Facebook is trying to do is nudge more content creators to host original content on its video platform, which Facebook has been aggressively building out over the past two years (remember when shares sold off in October 2014 after Facebook predicted massive spending on infrastructure necessary to deliver video?). More recently, Facebook has rolled out live-streaming, and it scored a few deals with media outlets to create original live content. So in essence, Facebook has already been helping fund some original content in a very small scale, relatively speaking.
The challenge is that, like other platform operators, as soon as you get into the business of funding content, the lines get real blurry, real fast. Facebook would theoretically have a vested interest in promoting its own content over third-party or licensed content. In other words, it has the potential to compromise Facebook's objectivity, a critical requirement for any platform operator.
That being said, if the investments are fairly small, and are primarily intended to serve as a sort of incubator where Facebook attempts to jump-start the platform with some initial funding, and its ambitions don't go much farther than that, then it makes more sense -- kind of like how Facebook's Oculus VR recently announced that it would invest $250 million to help fund the development of VR content. If there's a dearth of content that needs to be addressed, opening the wallet can help get things going. Platforms die without content.
Facebook hasn't given too much detail on its original content aspirations, but fortunately it does sound like this is the goal. The last thing that Facebook should do is invest a significant amount of resources in a long-term strategy of original content, since it's incredibly difficult to balance operating a platform and running a content business built on that same platform.
Evan Niu, CFA, owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.