‘The Interview’ Is Key For Facebook

James Franco and Seth Rogan’s movie “The Interview” had possibly the most free publicity a comedy film could ask for. By now, almost every has heard about the scandal surrounding the release, then non-release, then finally the limited release/ streaming release of “The Interview”.

Hackers posted online that there would be serious consequences against any movie-goer who saw the film just a week before the release. Consequently, the film giant Sony decided to shelve the comedy flick after would-be audience members voiced concerns. Sony’s action was met with a public outcry by politicians, celebrities and movie-goers alike. Caught in the middle, Sony left the decision up to the individual theaters whether to show the film or not and made the film available online for $5.99 for individuals to stream.

Even with the extremely limited release The Interview still grossed $1 million at the box office on Christmas day alone, with many of the theaters who chose to show the film selling out every showing. Sony finally released their streaming numbers yesterday announcing that they grossed $15 million on opening weekend through streaming. All told, Sony reports that they have grossed $17.8 million on ‘The Interview’, compared to production costs of $44 million.

At first glance, this seems like a major loss. Sony currently is in the red $26.2 million on this project. All facets of the release need to be taken into account however. As of December 28th, Sony stated that two million people had streamed ‘The Interview’. That is with an exceptionally limited advertising timeframe and online distribution plans, partnership and channels.

Enter Facebook to the equation. Sony would have benefited greatly from a digital, online and social media partner on this release. Unfortunately, there simply wasn’t enough time to pursue an option like this.

Facebook is one of the largest, most powerful and best run social media stocks out there. There is a reason that they have the largest market capitalization in the social media space. Consider some key facts concerning the blue chip social media juggernaut.

• Facebook has over 1.35 billion monthly active users on Facebook alone. (Per Venturebeat )


• Facebook has another 600 million monthly active users on WhatsApp. (Per Mashable )


• Facebook has another 300 million monthly active users on Instagram. (Per Gigaom )


• Approximately 30% of the users across all of Facebook’s brands are between the ages of 25-34 (Per Zephoria )

There are some key facts that investors need to understand about Facebook. First, Facebook is committed to building their brand through increasing the products and features it provides to users, and increasing their user base. Secondly, Facebook is committed to monetizing or further monetizing each of their platforms (i.e. Facebook, mobile, WhatsApp, Instagram, etc.). Possibly the most important item for investors to note is that Facebook is intent on providing video, streaming and creating video content for users.

The last point can not be stressed enough. Facebook’s Sheryl Sandberg is as visionary an executive as Mark Zuckerberg. She realizes the future of online business and content resides in video and content curation. This is why Facebook, Verizon and the NFL announced a partnership deal just last week that will allow Facebook to begin showing NFL highlight video clips on their platform. This accomplishes the video content, monetizing and expanding product offerings objectives that Facebook has.

We also see Facebook’s intent to enter video and content curation through a partnership agreement with Lionsgate and Stephanie Meyer to distribute five short films expanding on the mega-hit Twilight series . Facebook will be the exclusive distribution method for these five short films. Consider the statistical information we already disclosed.

Facebook has more than 2.25 billion monthly active users across all of their platforms, with 30% of those users residing in the key 25-34 year old demographic. That gives us 675 million users who fall within that demographic. When we consider Twilight’s rampant success with females and the fact that across the totality of Facebook’s platforms women make up 51% of users, that gives us 337.5 million targeted viewers. It is also important to note that we are completely disregarding the under 25 year old demographic in this calculation, of which many are avid Twilight fans.

To keep our variables as limited as possible let us assume that Facebook streams the short films for $5.99, consistent with Sony’s streaming price of ‘The Interview’. With the calculations we just comprised above, we see that more than 337.5 million viewers would have interest in viewing these short Twilight films.

To create a worst-case scenario, we will grossly underestimate how many of these individuals will stream the movies. With only 10% of the 337.5 million viewers streaming the films that would give us 33.75 million viewers per film. At $5.99 per streaming each short-film would gross $202 million, or more than $1 billion in total revenue for the entirety of the short-film series. Bear in mind this is a worst-case scenario, completely excluding the under age 25 demographic and only projecting 10% of the 25-34 age female demographic seeing the short-films.

This illustrates the immense power of Facebook’s size, reach and scope. Even with Facebook’s share at just 50% of the total gross it would add $500 million to Facebook’s bottom-line, or more than 5% of their current annual revenue with just one short-film series. Pair this with Facebook’s intention to challenge LinkedIn and to acquire an additional 1 billion new users . Facebook is prepared to more than double their total annual revenue by the end of 2016.

We would not be surprised to see Facebook make a major move or acquisition in the streaming space to give their new product offering a jump-start. Netflix would make for a very attractive takeover target for Facebook at current levels, and would provide the social media juggernaut access to some highly successful content creators responsible for hits such as ‘Orange is the New Black’ and ‘House of Cards’.

‘The Interview’ Is Key For Facebook