Tech: Netflix CEO Reed Hastings illuminated a major point about Facebook's new TV strategy (NFLX, FB)
Though Netflix CEO Reed Hastings sits on Facebook's board, the two internet giants aren't competing to buy the same shows, Hastings said Wednesday.
Though Netflix CEO Reed Hastings sits on Facebook's board, that hasn't led to any conflicts because the two internet giants aren't competing to buy the same shows, Hastings said at the Code Conference Wednesday.
Since 2011, Hastings has sat on Facebook’s board, but as Facebook's plans to fund TV-style shows have taken form, observers have asked whether eventually Hastings might have to leave.
At least for now, that doesn't seem to be something that bothers Hastings.
It's "not a big conflict yet," Hastings said Wednesday. "They are not doing 'House of Cards.' We are not bidding on the same shows. So not a big deal there."
These comments are significant since they come as Facebook is making its big move to take on traditional TV. Facebook is currently readying a slate of premium shows, to be released later this summer, primarily in two tiers. The first tier will be longer scripted shows, up to 30 minutes in length, bought by Facebook. The second tier will be shorter shows, with 5-10 minute episodes, which will not be owned by Facebook.
It's unclear how much money Facebook will spend on the longer, TV-like shows, but Reuters has reported up to $250,000 an episode. If that's true, it would put Facebook into a much lower tier than Netflix's first big original series "House of Cards," which cost a reported $4.5 million an episode starting out, and went higher, CAA agent Peter Micelli said in 2013. A $250,000 budget would also lend credence to Hastings' assertion that Netflix and Facebook aren't competing to buy the same shows.
Netflix is spending $6 billion on content this year, and will spend "a lot more" as time goes on. That means Netflix is bidding against pretty much anyone buying TV shows. So if Netflix and Facebook aren't bidding on the same shows, it indicates that Facebook's first bites in the TV show market will be small.
That doesn't mean, however, that Facebook and Netflix will never go head-to-head. The launch of Facebook's premium programming has been pushed back multiple times, and both "House of Cards" and "Scandal" have been used as examples of shows they'd be interested in buying in meetings, sources told Business Insider. So perhaps even Facebook doesn't know exactly what it wants for the higher tier.
If Facebook does end up putting up TV budgets for original shows, however, you could view Hastings as the canary in the coal mine. If he gives up his board seat, expect Facebook to start bidding against Netflix in a major way.