Facebook Music went live on Friday, as the social networking giant seeks a deeper integration of music, movies and other media into its service. The move could allow users to spend more time on its site, thereby enabling it to generate more advertising dollars.
We have become increasingly optimistic about the prospects of digital media businesses that are involved with Facebook, particularly Spotify and Netflix. The benefits of Facebook integration are plentiful but the most powerful benefit should be seen in SAC/subscriber adds, BTIG analyst, Richard Greenfield, wrote in a blog post.
We have found the vast majority of our right-side feeds to be taken up by a broadcast of what our friends are listening to on Spotify (great way to discover music). The constant promotion of the music service has already prompted numerous questions from other friends to find out about Spotify, the analyst added.
He said that Spotify is already the global leader amongst subscription music services and expects that lead to be expanded based on the relative volume of its social media references.
Interestingly, the Spotify homepage now asks if you have Facebook to start using Spotify and if you do not, it helps you get a Facebook account (scratching each other's backs!), Greenfield said.
On the other hand, the analyst expects similar benefits for Netflix, once they are successful in their fight to change video piracy laws.
If they are successful, we expect similar benefits for Netflix domestically, with Facebook integrations in Lat-Am and Canada helping to accelerate their earlier stage businesses in both markets, Greenfield added.
However, the analyst expects these benefits to be muted in comparison to those for music services. Quite simply, the number of movies or TV shows that will be published in a feed in a given day will pale in comparison to the number of songs listened to.
While there has been persistent speculation about what Netflix is doing in terms of simultaneous log-ons as a way to increase average revenue per user (ARPU) over time, Greenfield sees the personalization and socialization of media as far more important drivers of ARPU.
Meanwhile, social media is upselling family plans to enable personalized access.
In terms of music, family plans have already been introduced at Rdio and the analyst expects that Spotify will eventually follow. Rdio charges $9.99 for a single unlimited subscription but $17.99 for 2 subscriptions in a family and $22.99 for 3.
The significant jumps for Rdio are caused by licensing in music and the analyst suspects that family plans with multiple personalized accounts and without multiple logins could ease this issue. From a Netflix/video standpoint, their content deals are not based on subscribers, so they should have the ability to offer more compellingly-priced family plans than music subscription companies can.
We believe social is unlikely to drive full second or third subscriptions, but very likely to drive incremental ARPU that will also make the service stickier as more people in a household use a given service, Greenfield wrote.