Facebook Watch was abolished to keep Netflix as an advertiser


A recently unsealed document in a possible class action lawsuit alleges that Facebook shut down Facebook Watch to keep Netflix among its top advertisers — and to keep advertising for Netflix shows and movies away from emerging competitors like Snapchat, according to a person with knowledge the IndieWire lawsuit. And along the way, the two allegedly exchanged a lot of their data.

The lawsuit, filed by attorney Brian J. Dunne on behalf of other (despised, non-Netflix) Facebook advertisers, seeks billions of dollars in damages. If they win the lawsuit or settle, the exact dollar amount would be limited to a percentage of Facebook's total advertising revenue from 2016 to 2019.

Before Facebook launched the streaming video platform Facebook Watch in August 2017, Netflix spent about $40 million a year on Facebook ads, according to Dunne's letter to Judge Donato. Shortly after Mark Zuckerberg doomed Facebook Watch by decimating its budget in 2018 (the app lasted until the app officially expired in April 2023, but was never a serious content bidder again), spending rose to 150 million US dollars; two years later it was around $200 million.

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Sounds strange, but complicated. The alleged quid pro quo is not explicitly mentioned – at least not in the millions of documents produced in the now-completed discovery phase, our source says.

“For nearly a decade, Netflix and Facebook enjoyed a special relationship,” Dunne’s letter said. Facebook and Netflix also shared a lot of detailed user data, as well as a board member, Netflix co-founder (and then-co-CEO), Reed Hastings. Dunne's letter to Donato specifically asked Hastings to turn over the documents that had been requested by subpoena months earlier.

Dunne claimed that Hastings “personally managed” the relationship between Facebook and Netflix from 2011 to 2018. This included “communications about and negotiations to end competition in streaming video,” the lawyers claim, with Zuckerberg and Sheryl Sandberg on the other end.

The data relationship was so deep that Netflix allowed “programmatic access to Facebook users' private message inboxes” and to their “messaging app and non-app friends,” the document says. In return, Netflix would provide a written report every two weeks showing “daily counts of referral sends and recipient clicks by interface, initiation interface, and/or implementation variant (e.g., Facebook vs. non-Facebook recommenders).”

“Meta did not share people’s private messages with Netflix,” a Meta spokesperson commented when reached by IndieWire. “As the document states, the agreement allowed people to message their friends on Facebook about what they were watching on Netflix directly through the Netflix app. Such agreements are common in the industry. We are confident that the facts will show that this complaint is without merit.”

The company did not comment further.

SUN VALLEY, ID – JULY 12: Mark Zuckerberg (left), CEO and founder of Facebook Inc., speaks with Donald Graham (center), CEO and chairman of The Washington Post Company, and Reed Hastings, CEO of Netflix, during the Allen & Company Sun Valley Conference on July 12, 2012 in Sun Valley, Idaho.  The conference has been hosted by the investment firm Allen & Company every July since 1983.  The conference is typically attended by many of the world's most influential media executives.  (Photo by Kevork Djansezian/Getty Images)
Mark Zuckerberg speaks with Donald Graham and Reed Hastings, CEO of Netflix, during the Allen & Company Sun Valley Conference on July 12, 2012Getty Images

Facebook Watch wasn't Netflix, but the theory goes that with Facebook money, anything is possible. (Today, Facebook is worth about $1.3 trillion, which is nearly five times Netflix's $266 billion market cap.)

In 2016 and 2017, Facebook invested more than $1 billion in Facebook Watch with stars like Bill Murray (“Extra Innings”) and Elizabeth Olsen (“Sorry For Your Loss”). It was likely that Facebook and Netflix would go from partners to “potentially ruinous” competitors, as Dunne put it.

However, in an email dated May 25, 2018, Zuckerberg then “blindsided” Facebook Watch boss Fidji Simo by strongly suggesting cutting three-quarters of the project's budget, Dunne continued. It was over for Watch, but it was just the beginning for the Facebook-Netflix partnership.

More proprietary data sharing initiatives between Netflix and Facebook followed, Netflix's ad spending on Facebook increased, both tightened their stranglehold over their respective industries, and Facebook Watch barely gets a mention among the Seesos and Quibis littering the streaming graveyard.

Netflix did not respond to our request for comment.