Will The Video Deal Crunch Spell Trouble For Facebook (FB)?

As per The Wall Street Journal report, several television content owners are getting increasingly wary about striking deals with Facebook (NASDAQ:FB) for its Live platform and “Suggested Videos” as they are cautious about “ceding control to the social networking giant and undermining the value of their programming.”

Citing sources familiar with the matter, the report further adds that though several content owners including the likes of NFL and NBC Universal intend to bring their content to Facebook’s gargantuan user base, especially mobile users, they are not happy with Facebook’s financial terms. Cable TV is facing a severe threat due to an increasing number of viewers, especially millennials, opting for “cord cutting”. But Facebook reportedly wants its “ad sales force to be in charge of selling ads against TV companies’ videos”, which has irked TV content owners as this can dent their revenues.

Plus, Facebook recently changed its news feed layout whereby posts from family and friends will take precedence over other posts, adding to television content owners’ concerns.

Facebook is trying to tap the opportunity presented by ever increasing video viewing on social media platforms. A few days back, Facebook signed nearly 140 deals worth $50 million with several media firms like BuzzFeed, The New York Times, CNN, Huffington Post, Vox Media and Mashable and celebrities like actor Kevin Hart, chef Gordon Ramsay and Indian American author Deepak Choprato churn out live video content for its platform.

This is because online video is the most lucrative component of digital advertising. As video ads generate more revenues than its photo and text based counterparts, Facebook is trying to incorporate more and more video oriented content to bring in more ad dollars. Ad revenues contribute over 95% of Facebook’s revenues.

Moreover, the “live” feature is emerging as a terrific opportunity. Facebook also added that an initial survey found that people reacted 10 times more to a live video than regular videos.

With content owners “resisting video deals” with Facebook for Live, it might dent Facebook’s plans of turning it into a powerful growth engine.

At present, Facebook sports a Zacks Rank #1 (Strong Buy). Other stocks worth considering in the tech space include Quotient Technology Inc. (NYSE:QUOT) , MeetMe, Inc. (NASDAQ:MEET) and VeriSign Inc (NASDAQ:VRSN) . While Quotient Technology sports the same rank as Facebook, MeetMe and VeriSign carry a Zacks Rank #2 (Buy).