Even more bad behavior by Facebook exposed via lawsuit discovery, and giving access to private DMs is pretty bad.
Facebook Watch, Netflix were allegedly bigger competitors than they let on.
By Scharon Harding
Last April, Meta revealed that it would no longer support original shows, like Jada Pinkett Smith’s Red Table Talk talk show, on Facebook Watch. Meta’s streaming business that was once viewed as competition for the likes of YouTube and Netflix is effectively dead now; Facebook doesn’t produce original series, and Facebook Watch is no longer available as a video-streaming app.
The streaming business’ demise has seemed related to cost cuts at Meta that have also included layoffs. However, recently unsealed court documents in an antitrust suit against Meta [PDF] claim that Meta has squashed its streaming dreams in order to appease one of its biggest ad customers: Netflix.
Facebook allegedly gave Netflix creepy privileges
As spotted via Gizmodo, a letter was filed on April 14 in relation to a class-action antitrust suit that was filed by Meta customers, accusing Meta of anti-competitive practices that harm social media competition and consumers. The letter, made public Saturday, asks a court to have Reed Hastings, Netflix’s founder and former CEO, respond to a subpoena for documents that plaintiffs claim are relevant to the case. The original complaint filed in December 2020 [PDF] doesn’t mention Netflix beyond stating that Facebook “secretly signed Whitelist and Data sharing agreements” with Netflix, along with “dozens” of other third-party app developers. The case is still ongoing.
The letter alleges that Netflix’s relationship with Facebook was remarkably strong due to the former’s ad spend with the latter and that Hastings directed “negotiations to end competition in streaming video” from Facebook.
One of the first questions that may come to mind is why a company like Facebook would allow Netflix to influence such a major business decision. The litigation claims the companies formed a lucrative business relationship that included Facebook allegedly giving Netflix access to Facebook users’ private messages:
By 2013, Netflix had begun entering into a series of “Facebook Extended API” agreements, including a so-called “Inbox API” agreement that allowed Netflix programmatic access to Facebook’s users’ private message inboxes, in exchange for which Netflix would “provide to FB a written report every two weeks that shows daily counts of recommendation sends and recipient clicks by interface, initiation surface, and/or implementation variant (e.g., Facebook vs. non-Facebook recommendation recipients). … In August 2013, Facebook provided Netflix with access to its so-called “Titan API,” a private API that allowed a whitelisted partner to access, among other things, Facebook users’ “messaging app and non-app friends.”
Meta said it rolled out end-to-end encryption “for all personal chats and calls on Messenger and Facebook” in December. And in 2018, Facebook told Vox that it doesn’t use private messages for ad targeting. But a few months later, The New York Times, citing “hundreds of pages of Facebook documents,” reported that Facebook “gave Netflix and Spotify the ability to read Facebook users’ private messages.”
Meta didn’t respond to Ars Technica’s request for comment. The company told Gizmodo that it has standard agreements with Netflix currently but didn’t answer the publication’s specific questions.
Facebook’s streaming ambitions
Facebook announced Watch in 2017 and eventually released a Facebook Watch app. Besides Red Table Talk, Facebook was entangled with numerous other original shows, including Sorry for Your Loss, which lasted two seasons and starred Elizabeth Olsen, a Steve Harvey-hosted talk show called Steve, and content from National Geographic. Facebook also said that there would be one MLB game per week on Facebook Watch, as Ars reported in 2017.
But Facebook Watch never really took off as a full-fledged TV/movie streaming effort à la Netflix or Amazon Prime Video. And in 2023, efforts essentially ended when Facebook said it wasn’t renewing any Watch shows and laid off development and programming head Mina Lefevre. Lefevre was one of many layoffs suffered during that time period. And it seemed plausible that Facebook simply thought it couldn’t compete in streaming. At the time, Meta said it was going to focus on making VR experiences instead.
But the recently revealed court documents claim that Watch’s budget was pilfered years prior, while Hastings sat on Facebook’s board of directors. The letter claims that Facebook spent over $1 billion on Watch from 2016 through 2017. During that time, Facebook discussed interest in buying scripted 30-minute shows, as well as short shows with 5- to 10-minute-long episodes. In May 2017, Business Insider, citing anonymous sources, reported that Facebook used House of Cards, which is a Netflix original, and Scandal as examples of the kinds of shows it would be interested in buying.
Eventually, the potential for competition between the two companies became apparent. Then-Netflix CEO Hastings was asked about it at the 2017 Recode conference. He said: “There’s not a big conflict yet. They’re not doing House of Cards. We’re not bidding on the same shows. So not a big deal there.”
But per the unsealed documents, Hastings had regrets about his answer and later emailed Mark Zuckerberg and other Meta executives, allegedly saying: “Let me know if you think there was a better way to handle. In hindsight, I wish I added a materiality qualifier like ‘not generally bidding on the same content.’”
The plaintiffs’ letter claims that in January 2018, then-COO Sheryl Sandberg “went to Netflix for a ‘Fireside Chat’ in front of ‘500 senior [Netflix] people’ (with ‘Strict no recording’) in which she and Hastings carefully deflected, using scripted banter, the companies’ ‘direct video competition’ and ‘FB professional video strategy.'”
The plaintiffs also claimed that after Facebook was confident about having enough budget to license the likes of Dawson’s Creek “in competition with Netflix” in 2018, the Watch budget was mysteriously and suddenly slashed by $750 million that same year. Zuckerberg allegedly said via email in May 2018 that the budget changes were based on “knowing what I know today about our strategy and financial outlook.”
The letter alleges:
Despite… protestations, Zuckerberg’s abrupt new Watch strategy became policy—Facebook began dismantling the multi-billion dollar original content business it had built over the past two years… Amidst the sudden pivot in Facebook’s video strategy, the data partnership between Netflix and Facebook reached new heights.
Those new heights included, per the litigation, a new data-sharing agreement in July 2018 and Netflix reaching $200 million in advertising spend with Meta by 2019.
Good riddance?
To be blunt, Facebook has a poor reputation regarding customer data and advertising. For someone concerned about Meta’s record with privacy, misinformation, and more, it may seem like good news that Facebook doesn’t have its own Netflix competitor.
There’s also reason to believe that Facebook Watch was more about boosting ad sales than a yearning to distribute quality TV shows. As noted by the April letter filed in the US District Court in the Northern District of California, Facebook sought to boost “a slowdown in ad pricing growth by Q4 2015/Q1 2016.” The document claims that “Facebook began entering distinct ‘verticals’ to obtain signals for the AI/ML systems powering its ad business,” adding that “one of these new verticals was” Facebook Watch. With TV watching today often feeling like a big data grab already, we’re likely better off without Facebook Watch.
Meanwhile, it remains possible that Meta, like other companies, including Snap and YouTube, decided that it’s actually pretty hard to make money off of original video content.
That said, Netflix and Facebook’s chummy relationship does raise questions about how much ad dollars and corporate partnerships can limit customer choice. You may not have been eager to see Facebook Watch take off, but a leading streaming company using its pull to squash a budding streaming service would be concerning—especially if that service was potentially valuable to streaming users.
With streaming services already showing rapid evolution that’s expected to continue accelerating this year, it’s a notable time to consider which players are welcomed into the streaming arena with a fair shot and how inter-company politics and partnerships can impact the streaming options available to consumers.