NFL Games on Facebook: Could It Happen?

By Markets

Image source: Facebook.

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Facebook is firing on all cylinders. On its eponymous social-media site, the company continues to grow monthly active users, or MAUs, at a rapid clip, reporting 14% year-over-year growth last quarter. Facebook-owned Instagram continues to grow rapidly, pushing past Twitter in the number of active advertisers paying to place marketing on the site. As a result of this growth, last fiscal year Facebook grew its top line 44% on a year-over-year basis..

One of the larger changes helping Facebook's top-line growth was the company's decision to host native videos. According to CEO Mark Zuckerberg, 500 million people watch 100 million hours of Facebook videos every day. More recently, the company has added a live-video streaming-based function in addition to video hosting, and it seems Zuckerberg has big plans for this service going forward. Re/Code has a source saying Zuckerberg is "obsessed" with getting the Live product up and running. One industry that should watch Zuckerberg & Co.'s moves closely is traditional television.

Will Facebook take on traditional television?
In an interview with Variety, Facebook's VP of partnerships, Dan Rose, detailed Facebook's plans for live, streaming content. Rose states he has reached out to Hollywood agents to increase the use and acceptance of Facebook's live-streaming with actors and celebrities. However, the most-intriguing disclosure was the company's affirmation it was interested in a partnership with the NFL to secure rights to live-stream NFL games.

Earlier Re/Code reported the social-media site was in the running for streaming rights for up to 18 regular season games. The site also claimed, according to "industry executives familiar with the bidding process," that the NFL wants to have the streaming rights deals wrapped up before NFL Commissioner Roger Goodell meets with team owners on March 20. Facebook may not win the rights, but Rose's commenting during the auction process points toward a company growing increasingly confident in its chances.

Live sports, and the NFL in particular, have been a powerful moat for traditional television. Sports-related channels like Disney's ESPN have been bearish on the idea of a direct-to-consumer streaming option. However, the NFL seems open to the idea of streaming-based delivery.

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What's the purpose of exclusive TV rights if you can watch for free online?
Unfortunately for cord-cutters, the digital rights up for bid are for Thursday night games only. The television rights for these games were purchased by CBS and NBC last month for a combined $450 million per season. The two-year deal costs both networks 50% more than the $300 million CBS exclusively paid last year. The deal was for a total of 10 games, or $45 million per game, as both networks will air five games with the NFL-owned NFL Network airing the remaining games.

Judging by the large premium paid, it stands to reason both networks feel streaming will not affect viewership and ad placement to a large degree. However, this is surprisingly similar to the television industry's initial stance toward Netflix.Initially, networks tremendously underestimated the streaming company and provided Netflix the content it desperately needed to grow subscribers.

Media analysis firm MoffettNathanson reported a 3% decline in total TV viewership time in 2015, half of which they attributed directly to Netflix stealing market share. Paying 50% more for content that will also be delivered via live-streaming is either a testament to the popularity of the NFL or points toward broadcasters underestimating the popularity of streaming-based content services.

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Jamal Carnette has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook, Netflix, and Walt Disney. 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.