Facebook’s digital music ambitions have been making headlines this month, with reports of early talks with labels linked to its trial of ad-supported native videos.
But Music Ally can reveal that while Facebook will expand that trial to music videos soon, the social network is planning to follow that with the launch of an audio music-streaming service to compete with Spotify, Apple Music and others.
Sources speaking to Music Ally off the record have revealed just how bold Facebook’s plans are, with its plans to monetise music videos an important stepping stone towards the on-demand audio service.
That’s because the first phase will see Facebook paying royalties to music rightsholders for plays of their music videos on its service, while also launching a system akin to YouTube’s Content ID to help those rightsholders identify and then either take down or ‘claim’ user-uploaded videos featuring their music – getting associated ad revenues in the latter case.
Sources told Music Ally that talks for the music-video side of things are at an advanced stage, with a rollout expected to happen in the next few months. We understand that the Content ID-style system is being licensed in from a third party rather than built in-house, with labels keen to be sure that the system is reliable and efficient before finalising licensing deals.
Facebook will match YouTube’s per-stream rates to rightsholders at launch, although rightsholders hope there is scope for those rates to improve once the service is up and running – especially if Facebook’s targeting capabilities enable it to charge advertisers more, as well as if the social network stumps up to secure exclusives on specific videos.
“It’s a mass land grab. Facebook going into the video space was always going to be an enormous, ambitious land grab and no doubt something they’ve been planning for some time as the potential income from ad revenue will be incredible,” one source told us.
“On Facebook’s move into monetised video, all of us could see it coming for months,” said another source. “We have all been really utilising it in internal testing. It is way, way ahead of YouTube.”
It’s Facebook’s plans to build on this with a Spotify-style audio streaming service that are making waves within the music industry, even though the launch date and specifics of the business model and payout formula have yet to be nailed down.
Sources have told Music Ally that an audio service is very much on Facebook’s roadmap, but that both the social network and rightsholders realise that it has to get the monetised-video service right first. Again, the performance of the content ID and protection system will be a crucial factor.
Will Facebook build or buy its streaming music service? With the company having paid $19bn for messaging app WhatsApp, $2bn for virtual reality startup Oculus VR and $1bn for photo-sharing app Instagram, it has proven willing to splash out at multiple levels for companies to expand its offering.
Spotify’s current valuation is less than half the WhatsApp price, while a smaller, socially-savvy rival like Rdio could surely be picked up for a fraction of that price.
Despite this, Music Ally’s sources expect Facebook to build rather than buy, although they do not see that strategy as set in stone. Music Ally has approached Facebook, all three major labels, indie licensing agency Merlin and collecting society PRS for Music for comment. None were prepared to respond either on or off the record.
Our full feature on Facebook’s new music ambitions will be published in the Music Ally Report later today.